SWIFT is increasingly acknowledging the growing importance of DLTs in the finance industry. This may explain the SWIFT GPI, which is basically an attempt to forestall the growth of competitors like ripple in the banking industry. However, even SWIFT GPI is still a messaging system and doesn’t solve the problem of liquidity in instant cross-border transactions.
This means that SWIFT is still far behind in this market, relative to its emerging competitors. This is easy to deduce going by Marcus Treacher’s tweet about SWIFT’s proclamations during SIBOS 2018. From the tweet, SWIFT was essentially admitting that they don’t have the tech that its emerging competitors have. But what if SWIFT pulls a fast one and partners with stellar, as a liquidity solution to the SWIFT GPI? Sounds improbable? Well, it would be naïve to think that SWIFT will just sit back and watch its market dominance disappear.
Back in 2016, SWIFT published a position paper titled, delivering an industry-standard platform through community collaboration. One of the things that the paper touched on are the requirements needed for DLTs to gain wide adoption in the finance industry. Here is what SWIFT wrote about these requirements at the time.
“As part of our technology assessment, we have identified the following key requirements that DLTs need to attain in order to be widely adopted in the financial industry:
Strong governance – Governance models to clearly define the roles and responsibilities of the various parties as well as the business and technical operating rules;
Data Controls – Controlled data access and availability to preserve data confidentiality; • Compliance with regulatory requirements – The ability to comply with regulatory requirements (e.g. Sanctions, KYC, etc.);
Standardisation – Standardisation at all levels to guarantee straight-through processing (STP), interoperability and backward compatibility;
Identity framework – The ability to identify parties involved to ensure accountability and non-repudiation of financial transactions;
Security and cyber defence – The ability to detect, prevent and resist cyberattacks which are growing in number and sophistication;
Reliability – Readiness to support mission-critical financial services;
Scalability – Readiness to scale to support services which process hundreds or thousands of transactions per second.”
From the above excerpt, one thing stands out. That’s the fact that everything that SWIFT mentions about DLTs relates perfectly to the stellar network. For instance, Starlight, the state channel protocol that stellar is working on ties quite well to all the issues that SWIFT touched on in 2016. That’s because Starlight will solve the problems of data controls, standardization, and scalability in the stellar network.
Stellar also has a strong governance system that is decentralized. Best of all, the overriding organizations behind Stellar, like stellar.org are non-profit. This makes it easier for SWIFT to work with stellar as compared to other DLTs.
If such a partnership were to occur, it would be a game-changer to the cross-border payments. It would put stellar on the map, and stellar investors would reap big time. Stellar (XLM) has already made significant value gains this year partly due to the IBM blockchain world wire, which runs on the stellar network. A SWIFT partnership would be the trigger that pushes up stellar to unexpected valuations.