Germany’s DekaBank founded SWIAT with a grand plan to bring together global financial institutions on a shared digital asset platform, similar to what SWIFT has done for payments. SWIAT stands for Secure Global Interbank Asset Transfer and is an enterprise blockchain platform where banks control the nodes. He says it has sparked interest from LBBW and Standard Chartered, although there are no formal commitments yet.
Two executives from DekaBank, Germany’s fourth largest asset manager, presented the project yesterday at the European Blockchain Convention.
The problem that SWIAT wants to solve in the securities industry is familiar to incumbents. “We have a very fragmented hierarchical financial infrastructure which slows down the speed of transactions and is extremely expensive and extremely inefficient,” said Martin Müller, member of the board of directors of DekaBank.
“The challenge is not to use the technology. The challenge is to completely rethink transactions with the potential of the blockchain.
DekaBank concluded that data, assets and transactions should be linked and managed on a single blockchain network. They are not alone. Citibank is supporting a similar initiative, the Regulatory Liability Network (RLN), with enterprise blockchain company SETL. Not to mention the R3 network and all of its financial services investors.
One network for all digital assets?
Sometimes the desire for a single network is because the operator wants to have a monopoly. But there is a practical aspect. Currently, the high costs of financial infrastructure result from fragmentation and the need to integrate so many disparate systems.
When we asked SWIAT if they wanted to be the one and only network, the spokesperson’s response confirmed this: “It will be difficult to unite everything and everyone into one network, but what we need to aim for , it is :
- step by step join smaller islands to larger ones.
- agree on open standards to reduce fragmentation and create interoperability within and between networks.
Therefore, SWIAT is not intended to target only tokenized securities. Ultimately, the goal is to support traditional securities, digital securities, crypto securities, tokenized assets, crypto assets, and money on the same network.
At the same time, Jonathan Leßmann of DekaBank observed that most platforms and consortia either struggle or fail because they try to solve too many problems at once. Thus, SWIAT intends to be the only network with others to offer services.
Progress to date – securities lending
The SWIAT network is already operational and plans to close a round of funding with industry participants in the middle of next year.
One of the areas already developed is securities lending. SWIAT does not seek to tokenize existing securities but to create a blockchain-based settlement layer, a Digital Collateral Protocol (DCP). He wants “to keep the securities in their place – with the depositary and the CSD”. In November, it carried out a securities lending transaction with Metzler Bank without prior collateral. He called the exchange of securities “delivery for delivery”.
DCP is quite similar to another blockchain-based securities lending platform, HQLAX. Deutsche Boerse and several large banks such as JP Morgan, Goldman Sachs and Citi are participating. By the name HQLAX, it is designed for banks that trade high quality liquid assets.
We asked how the SWIAT solution differs. “SWIAT in general and DCP in particular are universal solutions to a variety of needs in the financial markets. It is not a specific solution to a specific problem only, ”said the spokesperson for SWIAT. “SWIAT is designed to be an ecosystem made up of flexible financial protocols that market players can use according to their needs. “
Green bond register
Earlier this month, DekaBank introduced another application using SWIAT for a Green Registered Bond. SWIAT was integrated into the firstwire debt market, where Swedish real estate company Vasakronan AB issued a green bond to DekaBank as an investor. DekaBank has also taken on the role of Registrar using SWIAT to track current bond holders.
SWIAT’s potential business model includes the typical models you would expect from network management companies, such as transaction fees, potentially product-specific fees, professional services, and, for those who don’t want to host their own nodes, accommodation.
The last piece of the puzzle is technology. Although the network is a corporate blockchain running Hyperledger Besu, choosing a Besu is no accident. SWIAT wants to stay as close to Ethereum as possible because it is the largest ecosystem of digital assets to date. We observe that Besu can be used on both private and public blockchains.
On public blockchains, someone asked if crypto is an existential challenge for banks at the conference.
“This is a unique chance for the banking (industry) to shed fragmented infrastructure and move from the old world to the new world. So there is a lot to be gained for the financial services industry because it can overcome obstacles, ”said Martin Müller, member of the board of directors of DekaBank.
Referring to a trend towards central counterparties, he added: “Especially if you look at blockchain with its decentralized function, this is the one and only chance for custody and other banks to maintain their role.”