Swift tokenized ledger sharpens focus on payments settlement layers

Swift said its blockchain-based ledger is ready for initial use, with 17 banks preparing live pilots for cross-border payments using tokenized deposits and round-the-clock availability. The move places the bank-owned messaging cooperative alongside public and private initiatives that are testing how commercial bank money, central bank money and tokenized assets may interact at scale.

The banks preparing to pilot transactions are ANZ, BNP Paribas, BNY, Citi, DBS, First Abu Dhabi Bank, FirstRand, HSBC, Itaú Unibanco, Lloyds Bank, Mashreq, MUFG, OCBC, Standard Chartered, UBS, UOB and Wells Fargo, according to Swift. The cooperative has presented the ledger as an extension of its global platform and as a base for services involving programmable money and automated transactions.

Roberto Garavaglia, an independent payments and blockchain adviser, wrote in a Finextra commentary that the Swift ledger should be viewed alongside three other initiatives: Project Agorá, led by the Bank for International Settlements and the Institute of International Finance; PONTES, developed by the Eurosystem; and APPIA, the European Central Bank’s strategic programme for tokenized finance. His analysis described the projects as operating at different layers rather than as direct substitutes.

Where the systems differ

The distinctions turn on the mechanics of payment chains. Clearing covers the transmission, reconciliation and, in some systems, netting of payment information before final discharge of obligations. Settlement is the point at which the transfer of the settlement asset becomes final and irrevocable.

A tokenized deposit is a digital representation of a customer’s claim on a commercial bank, recorded on a distributed ledger or similar system. A wholesale central bank digital currency, or tokenized reserve, is central bank money for banks and other authorised institutions. A MiCAR electronic money token is a regulated form of electronic money that references one official currency and gives holders a redemption claim against its issuer.

Garavaglia said Swift’s new ledger is best understood as an orchestration layer for moving tokenized commercial bank deposits. In its early form, it may coordinate transfers between banks while final interbank settlement can still rely on existing payment systems. Swift’s advantage, he wrote, comes from its network of thousands of financial institutions in more than 200 countries and territories, as well as its integration with banks’ current systems.

Agorá, PONTES and APPIA

Project Agorá has a broader monetary scope. The BIS and IIF initiative involves seven central banks and more than 40 private financial institutions, according to Garavaglia’s summary. It is testing a shared programmable architecture that includes tokenized commercial bank deposits and tokenized central bank reserves, with atomic settlement for multi-currency wholesale payments.

Atomic settlement means linked parts of a transaction complete together or do not take effect. In tokenized securities, that structure can connect the delivery of an asset with the cash leg of a payment, reducing the risk that one party transfers value without receiving the corresponding consideration.

PONTES addresses the euro-area settlement layer. Garavaglia described it as a Eurosystem solution intended to connect market distributed-ledger platforms with TARGET Services, allowing wholesale transactions executed on DLT platforms to settle in central bank money. The model can use cash tokens on a Eurosystem DLT platform or T2, the Eurosystem’s real-time gross settlement system.

APPIA has a longer horizon. It is not a live payment platform, according to Garavaglia, but a Eurosystem roadmap for a European tokenized finance system covering interoperability, common standards, tokenized instruments, collateral, cross-border links, legal foundations and the respective roles of public and private money.

The emerging contest is therefore over the common layer that connects bank deposits, central bank money, financial instruments, compliance systems, smart contracts and payment standards. Garavaglia said Swift brings distribution, Agorá brings a multi-currency monetary model, PONTES anchors euro settlement in central bank money, and APPIA may shape Europe’s institutional design.

This story draws on original reporting from Finextra Research.