Decentralized Oracle provider Chainlink will introduce a new blockchain payment solution for financial institutions.
In collaboration with Swift, a global messaging network used by banks and institutions, Chainlink revealed a new integration enabling institutions to use Swift messages to interact with blockchain technology.
The integration will enable digital asset settlement with minimal adjustments to existing infrastructure while establishing a bridge between decentralized finance (DeFi) and traditional finance (TradFi).
Source: Chainlink
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Swift-er blockchain payments
Sergey Nazarov, co-founder of Chainlink, highlighted the practical benefits of the integration in a speech given at the Swift-organized Sibos conference in Beijing, China:
“We are in a pre-production stage where we can start offering you something that you can actually start using with your existing institutional systems.”
He said the solution will enable pre-settlement and transaction confirmation through Swift’s established messaging standards, which are already widely used in TradFi.
After confirmation, Chainlink’s infrastructure would convert these messages into blockchain events, enabling institutions to lock assets and execute payments onchain.
Infographic depicting Chainlink’s CCIP integration with Swift for new blockchain-based payments. Source: Chainlink
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Institutional privacy implications
Nasarov also discussed the new Blockchain Privacy Manager (BPM), a privacy-preserving feature that enables private chain integration with the public Chainlink platform.
He said privacy has been “deeply lacking quality in the blockchain industry” and that it has “kept the capital markets from adopting digital assets and blockchains.”
“The Blockchain Privacy Manager […] can allow you to manage the privacy assumptions of everything related to your chain […] allows the data from your bank to be selectively placed into certain chains, but not others, and allows you to authoritatively manage what information can and can’t reach chains from your bank.”
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BPM targets financial institutions that want end-to-end privacy when using blockchain applications and is encrypted by Chainlink Cross-Chain Interoperability Protocol (CCIP) Private Transactions.
This functionality, paired with the new Swift integration, will allow institutions to conduct sensitive transactions, including private tokenized asset trading or cross-border payments.
Infographic depicting the functionality of Chainlink’s Blockchain Privacy Manager. Source: Chainlink
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Update (Oct. 23 at 5:10 pm UTC): This article has been updated to remove a section about centralization concerns in Chainlink’s payment solution. The feature is for private chains, which are by definition “private” and therefore controlled by and used by a limited group of entities.