Breaking: Swift has been actively involved in exploring the adoption of blockchain for its inter-bank messaging protocol. SWIFT recently had its attempt with @Citi with the POC to settle and synchronise both fiat & digital assets in a PvP flow. 🧵👇👇 Context 1. Two payment legs need to settle - 1st leg: Fiat payment → moves inside the banking system (via Swift) - 2nd leg: Digital asset payment → moves on a blockchain (USDC on Ethereum Sepolia) - Both must settle at the same time, or else one party takes settlement risk (Herstatt risk). 2. Core issues: - Fiat transfers can be reversed (banks can roll back entries); blockchain transfers are irreversible (cannot be undone). - The two systems do not speak the same language: fiat settles on Swift messaging + bank ledgers, while digital assets settle on smart contracts + wallets. @Citi & Swift built a workflow to synchronize them. Workflow: Step 1: Trade Initiation - A transaction is agreed between two parties (e.g., pay USD fiat ↔ receive USDC). - Swift’s new holistic messaging standard captures: asset types (fiat + digital), sender/recipient details, transaction references, settlement instructions, plus data fields specific to blockchains (wallet addresses, chain ID, token type) This message defines the entire workflow before anything moves. Step 2: Orchestrator Takes Control A central orchestrator coordinates everything: reading Swift messages, talking to Citi’s banking systems, talking to blockchain connectors, sequencing actions in the correct order, and ensuring both legs settle only when conditions are met It is basically the “traffic controller.” Step 3: Escrow on the Blockchain Because digital asset transfers cannot be reversed, @Citi uses a smart-contract-based escrow: the $USDC (test tokens) is locked inside a smart contract, which enforces conditions: - to release USDC only when fiat settlement is confirmed - or return funds if fiat leg fails This solves the irreversibility problem. Step 4: Fiat Leg Preparation Inside the traditional system: - Swift messages are sent to correspondent banks. - The fiat amount is prepared for settlement. - Banks confirm readiness through Swift’s messaging. Both sides confirm: “I am ready to settle my leg.” Step 5: Synchronized Settlement via Messaging The orchestrator now checks both sides: - Is the fiat leg ready?(Confirmed via Swift message) - Is the digital leg ready? (Escrow contract holds the tokens) If both conditions are true, the orchestrator sends the final “SETTLE NOW” instruction. Then: - Fiat leg settles on the bank ledger - Digital asset leg releases from the smart-contract escrow This is synchronized PvP (“if you settle, I settle too”). Step 6: Settlement Confirmation After both sides settle, - Blockchain: smart contract emits a settlement event - Banking system: Swift sends confirmation messages The orchestrator collects confirmations and sends “settlement complete” back to both participants. This experiment shows that both fiats in banking system and stablecoins on blockchains can move concurrently! As tokenized deposits (e.g. @jpmorgan's $JPMD) and stablecoins are growing rapidly, we need a synchronized way to settle fiat–digital trades safely. What's interesting is whether Swift's unique positioning today would be weakened as blockchain as a open network is becoming the main venue of settlement.