Swift, a banking messaging service at the heart of the financial system, has announced a partnership with Chainlink, a blockchain company. This union between two giants from very different sectors of finance will bring a lot of changes.
The partnership was soberly announced on September 28, 2022 during the Smartcon conference: Chainlink, a decentralized network running on blockchain, and Swift, a banking messaging system, will collaborate.
That being said, the news is not exceptional – without knowing the two entities, it may even seem rather ridiculous. Still, Swift is one of the most powerful financial instruments in this world, and Chainlink is a central authority in the cryptocurrency industry. Their partnership is a major signal.
What is Swift?
To better understand what is at stake, we must first go back to the beginning: what is Swift? Swift, for Society for Worldwide Interbank Financial Telecommunications or Society for Interbank Financial Transfers, is a company headquartered in Belgium. Its role is essential: Swift is a messaging network and allows banks to communicate with each other.
Its role is to transmit messages, such as payment orders, transfers, securities transactions or cash transactions. Swift also guarantees the security of these messages. It’s clear that much of the world’s banking business relies on Swift.
Swift is usually a fairly discreet organization known only to people working in banks or financial institutions. But in February, just after the start of the war between Russia and Ukraine, it found itself at the center of international news when several Russian banks were excluded from the Swift network.
Chainlink, what is this?
In contrast, Chainlink is a company specializing in blockchain and decentralized structures. Specifically, Chainlink is developing “ oracles “, a term used in the cryptocurrency industry to describe types of bridges connecting blockchain and infrastructures and external information. In a sense, Chainlink allows a large number of blockchains to be connected and communicate with the physical world thanks to its oracles.
In addition to oracles, Chainlink is also known for the blockchain interoperability protocol it developed. CCIP (for Inter-Chain Interoperability Protocoleditor’s note) allows you to send messages and transfer cryptocurrencies across many blockchains.
These actions are usually not possible naturally because blockchains cannot communicate with each other. a lot bridge (bridges) are created to allow cross-chain operations, but they are regularly targeted by hackers. Chainlink offers a universal messaging interface and smart contracts that allow orders to be transmitted across the blockchain very easily without having to use these bridges.
What will Swift and Chainlink do together?
The two companies may operate in very different worlds, but they still share some similarities – and that’s why their collaboration makes so much sense.
Swift and Chainlink will work together to develop “ proof of concept “. The goal is for the CCIP system to allow Swift to send messages across blockchains and thereby order transfers of funds in cryptocurrencies – or other operations. Specifically, if the two companies can work out a solution, Swift will be able to use CCIP to ” transfers assets between different blockchains in a secure manner ” says Cryptoast. All this without having to go through an intermediary and without having to include a bridge.
The news is very important because it represents the growing interest of traditional financial structures in cryptocurrencies, but above all because Swift has a large number of customers. More than 11,000 banks use Swift for their communication: if they decide to use it for their crypto operations as well, the company will very quickly have a central role in the sector.
This is an even more strategic decision as more countries launch their own digital currency. MNBC (for central bank digital currency) are digital currencies, like bitcoin and ethereum, but which are not decentralized: the latter are managed by central banks, hence their name. However, they operate on a digital ledger system (very similar to blockchain, but centralized), which means CCIP technology would prove very useful for making payment orders.
This isn’t the first time Swift and Chainlink have worked together. Jonathan Ehrenfeld Sole, strategy director of Swift, specified that the two companies had already started a project several years ago regarding the issuance and redemption of bonds. ” This new partnership between Chainlink and Swift and the blockchain interoperability protocol will bring the traditional finance and digital finance sectors closer together “, he also said. And perhaps even allow Swift to establish itself as a central player in decentralized finance.