Swift responds to stablecoin surge with blockchain launch

As stablecoins move steadily towards the financial mainstream, Swift’s blockchain announcement at this year’s Sibos banking and payments conference in Frankfurt came as little surprise. 

The international payments group this week said it would create its own blockchain aimed at providing real-time, 24/7 cross border payments “at global scale . . . accelerating the industry’s transition to digital finance.”

The ledger will be built using technology from software firm Consensys in collaboration with more than 30 lenders including HSBC, Bank of America, JPMorgan Chase and Deutsche Bank.

“In conversation with these institutions, you clearly feel that the moment is now to bring the collaboration together,” said Thierry Chilosi, chief business officer at Swift, speaking on a Sibos panel on Monday.

The new ledger will record, sequence and validate transactions and allow for the enforcement of rules through smart contracts, according to Swift. The ledger will be built for interoperability, both with existing and emerging networks.

The move, which builds on Swift’s previous experiments to speed up cross-border payments, comes as the company looks to head off emerging challenges to its operating model from stablecoins and other digital asset-based technologies.

“Everybody in the industry talks about how blockchain and this technology is going to kill Swift, so for [them] to be exploring blockchain use cases makes complete sense,” said Chris Maurice, chief executive of emerging market stablecoin company Yellow Card.

Swift hopes its new blockchain-based infrastructure will enable its bank members to transact using digital assets such as stablecoins and tokenised deposits. 

Stablecoins in particular have exploded in popularity in the past year, particularly since the signing into law in July of the US GENIUS Act (see Regulation Tracker), which creates a legal framework for US dollar-denominated, privately issued stablecoins.

And while stablecoin usage remains overwhelmingly outside the financial mainstream — with JPMorgan estimating that international payments within traditional finance account for just 6 per cent of usage internationally — the technology is inching ever closer to the financial mainstream. 

Last week, nine European banks, including UniCredit and ING, announced plans for a euro-backed stablecoin. The move coincided with the launch of a live trial of tokenised deposit transactions by UK banks including Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander.

The use of such digital assets come as mainstream financial institutions examine their potential for reducing settlement times and costs. Data from the Financial Stability Board for 2024 shows that costs incurred for cross border retail payments exceed 3 per cent for nearly a quarter of global payment corridors, with one-third of such transactions taking more than one business day to be settled in 2024.

The FSB noted that costs and settlement times had stagnated and even worsened in many corridors in 2024, raising fresh questions about the correspondent banking model — underpinned by Swift — that has dominated the cross-border landscape for several decades.

“There are always questions about whether the correspondent banking model is still an efficient method moving forward for carrying out cross border payments,” said a senior executive at a bank participating in Swift’s blockchain initiative, who asked not to be identified.  

They described the new initiative as a “positive development”, but said that further details about the scheme are needed. 

The limitations of Swift’s existing network are felt most acutely in emerging and frontier markets, where transactions can take several days to settle and incur often exorbitant fees.

Stablecoin usage for international payments in sub-Saharan Africa has increased markedly in recent years as businesses look to disintermediate transactions away from traditional banks, even as regulatory oversight of the technology’s usage remains vague.

Swift’s embrace of blockchain technology, while welcome, was unlikely to halt such a trend, according to Maurice.  

“I think that there is a broader question of how this is going to impact Swift’s revenue and pricing,” he told The Banker. 

“How are these guys going to change the way that their system works to actually meaningfully move into this space?”

Yet Swift’s key interbanking role is unlikely to be usurped anytime soon, a second senior executive told The Banker, with its blockchain rail likely to solidify its central position in the international payments landscape. 

“Swift is a key industry enabler that is connected to virtually all the world’s banks, and there is no other network with that sort of reach,” said the executive, whose bank is also participating in the blockchain scheme. 

“[With this new layer] payments can become truly 24/7, instantaneous and immutable.”