SINGAPORE (Sept 22): SWIFT, the four-decade old international co-operative that runs messaging system among banks, is calling for a reality check on the buzz surrounding the use of distributed ledger technology, as part of the wider move by start-ups, regulators, investors and banks to be seen on top of the fintech bandwagon. In a new paper published today, SWIFT says distributed ledger technology (DLT) and smart contracts (SC) are not quite ready for prime time. “The paper recognises that full-scale standardisation of DLT/SC use cases is premature,” says Stephen Lindsay, Head of Standards. DLT and SC run on so-called blockchain technology, which links up all parties within the same financial system together. Transactions are made sequentially, and the changes are made open for all within the same system to see. This, says the proponents, give much better security and spread the trust around, as there isn’t a central clearing party that controls all the levers. Other proponents argue that the use of DLT and SC makes it more efficient and thereby cheaper for parties to transact with one another. SWIFT acknowledges that DLT and SCs are generating a “huge amount of interest”. However, to drive adoption on an “industrial scale”, there is a need to standardise. Market participants need to work together to define and agree on the meaning and format of the data deployed on DLT platforms, outline formalised business processes, and clarify legal implications, says the Belgium-based organisation. Just to be sure, SWIFT isn’t rubbishing the use of DLT and SC. Rather it sees this technological development surrounding DLT and SC as a “clear opportunity” for the global financial community to come up with common messaging and data standards. Various banks and financial institutions, had come together to form groupings such as R3, to decide upon common protocols. And SWIFT, of course, wants a seat at such tables. “SWIFT stands ready to work with the community to conduct further studies into the reuse of existing business standards in order to better facilitate the efficient workings of DLT/SC technologies for the financial industry as a whole,” says Lindsay. “This paper addresses some integral questions about how DLT/SC automation can run smoothly in a multi-party network environment and highlights the importance of avoiding ‘reinventing the wheel’ when it comes to business definitions that facilitate interoperability,” he adds. (See also: Deutsche Bank calls for reform of global financial messaging system SWIFT)
It is too early for the widespread adoption of distributed ledger technology (DLT) and smart contracts, according to a paper released by the international bank messaging co-operative SWIFT. The report highlights the need for standardisation before DLT can be adopted on an industrial scale. “Distributed Ledger Technology has been around since 2009, but it still needs more time to become mainstream in financial services,” said SWIFT chief executive David Chaum.