Visa has long feared competition from stablecoins, so much so that even before the Genius Act, it had begun exploring a partnership with Solana. The same is true for other electronic payment operators such as Revolut and PayPal. In truth, these operators are concerned about the speed of transactions that some blockchains can achieve, which explains Visa’s interest in Solana.
It was recently announced that SWIFT (Society for Worldwide Interbank Financial Telecommunication) will also enter the blockchain landscape for international payments with a pilot project involving major financial institutions such as Bank of America and Citi Group. S.W.I.F.T. SC is a cooperative founded in 1973 in Belgium (in French: Société Coopérative) and owned by the banks and other affiliated companies that use its services. SWIFT provides the main messaging network through which international payments are initiated. It also sells software and services to financial institutions, mainly for use on its proprietary “SWIFTNet” network, and assigns ISO 9362 (BIC) company identification codes, commonly known as “SWIFT codes.”
In 2018, approximately half of all high-value cross-border payments worldwide used the SWIFT network, and in 2015 SWIFT connected more than 11,000 financial institutions in over 200 countries and territories, exchanging an average of over 32 million messages per day (compared to an average of 2.4 million messages per day in 1995). We refer to messaging because international transfers are based on a protocol developed by SWIFT similar to the FIX protocol (designed by Salomon Brothers) for financial asset transactions and, in general, to all protocols used on the Internet for the exchange of information, such as http for web pages, ftp for files, smtp for emails, and so on. All these protocols work on the basis of exchanging messages to establish secure connections and identifications and to give instructions to modify private and centralized registers. Messaging also exists in blockchains, and is used to enter and disseminate operations (transactions) on the network that will only be accepted (by most nodes) if a (certain type of) consensus is reached: essentially, we are talking about completely different algorithms and data structures; a diversity that prevents dialogue between the two technologies. A traditional transaction system cannot be “migrated” to blockchain: a new system must be built that works on blockchain and is managed in parallel with the old one without the two systems being able to communicate. At this point, a decision can be made to abandon the old system in favor of the new one.
The banking world is moving primarily in the stablecoin sector, where the driving force is the Genius Act, which has also stimulated development at the European level: a consortium of banks including UniCredit, ING, and Danske Bank have announced that they will jointly launch a euro-denominated stablecoin by the second half of 2026 in an attempt to compete with the market for stablecoins denominated mainly in dollars and to explore the use of tokens for their transactions.
SWIFT will collaborate with Consensys, a company specializing in blockchain technology, to create a prototype of the ledger, which will then be tested with banks to decide which transactions—in which currencies and between which countries—to offer first. Consensys is led by Joseph Lubin, one of the early pioneers in the cryptocurrency industry and co-founder of Ethereum. The goal is therefore to create a permissioned blockchain where only authorized operators will be able to operate. We therefore imagine that the new digital register will be used by the same operators who currently use the SWIFT protocol and who will benefit from greater speed, lower and fully transparent costs, and 24/7 coverage. A McKinsey report highlights how traditional systems can take up to five days to complete a transaction, involve several intermediaries, and generally perform anti-money laundering and other regulatory checks on customers manually or only semi-automatically. All this can be eliminated with the use of a blockchain because, by design, it has no intermediaries to carry out transactions, as intermediation is guaranteed by smart contracts. Like all internet services, it never closes and, with the right consensus algorithm, can achieve high performance. A controlled-access blockchain (unlike Bitcoin, to be clear) can rely on more efficient protocols than PoW and is also potentially capable of better managing anti-money laundering checks. In our opinion, the real problem lies precisely here: currently, these checks are manual or semi-automatic. How will it be possible to guarantee total automation, and therefore greater speed, while at the same time ensuring security? We imagine that there will be oracles that will have to interact with the new structure and therefore “points of failure” that can be attacked and that do not necessarily guarantee data certainty. This is a great challenge, which we believe will be difficult to overcome, but which testifies to a clear direction in which the world of financial transactions is heading.
Disclaimer
This post expresses the personal opinion of the Custodia Wealth Management staff who wrote it. It is not investment advice or personalized advice and should not be considered an invitation to carry out transactions on financial instruments.
