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Chainlink, Swift to Trial Linking Financial System Actors to Blockchains

Swift, the messaging system used for interbank communication, and Chainlink (LINK), a supplier of blockchain real-world data, have announced a collaborative effort with numerous financial institutions. The objective of this initiative, as outlined in a press release released last week, is to explore how these institutions can establish connections with various blockchain networks.

In a series of tests, Swift will join forces with prominent traditional financial organizations such as the DTCC, ANZ, Citi, BNY Mellon, BNP Paribas, Euroclear and Clearstream. The primary aim is to evaluate the feasibility of utilizing Swift’s innovations to facilitate the exchange of tokenized assets between different blockchains.

This proof-of-concept project has been devised to demonstrate the practicality of interoperability between private and public networks. The testing will initially focus on asset transfers on the Sepoliatestnet of Ethereum, which connects the Ethereum mainnet to a permissioned blockchain. The collaboration will also examine transfers between Ethereum and other public networks.

To facilitate these experiments, Chainlink will offer interoperability between private and public blockchains. The partnership between Swift and Chainlink was initially unveiled at Chainlink’s yearly conference: SmartCon.

This collaboration not only holds significance for banking institutions but also signifies a crucial milestone for the cryptocurrency industry, as emphasized by Sergey Nazarov, cofounder of Chainlink. Nazarov highlighted the global capital held by banks and expressed the belief that the industry’s growth beyond trillions of dollars will be driven by the participation of banks and their customers in the blockchain sector.

This development underscores the increasing interest of institutional players in integrating customer requirements through public and permissioned blockchain networks such as Ethereum, said Swift’s head of securities strategy, Jonathan Ehrenfeld.

The potential inclusion of public blockchains by Swift could have a profound impact on the Web3 sector. Swift acknowledged that blockchain-enabled operational efficiencies have the potential to attract more players to the private markets, consequently enhancing liquidity.

According to the Financial Times’ estimation, Swift handled over one-half of all international cross-border transactions in 2018. The paper also noted Swift’s flaws, pointing out that its transactions were time-consuming, expensive and opaque as to the total amount of money received.

This joint effort between Swift, Chainlink and major financial institutions may pave the way for optimizing various types of securities for public chains, addressing the growing acceptance of digital assets. Currently, the total market capitalization of the cryptocurrency market stands at $1.08 trillion, according to CoinMarketCap data, further indicating the increasing importance of these initiatives.

Major industry actors such as HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE) will likely be pleased that Swift and Chainlink are working together to make the broader penetration of blockchain technologies possible in the general financial system.

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