Interbank messaging network SWIFT has successfully conducted a distributed ledger technology (DLT) proof of concept for Nostro reconciliation with 34 banks.
With this PoC, SWIFT sought answers to a number of questions surrounding DLT: whether the technology, combined with SWIFT assets, would meet industry-level governance, security and data privacy requirements; whether DLT could bring concrete benefits over other architectures; and to check the technology’s current level of maturity to serve as a production-grade application within a mission-critical global infrastructure.
SWIFT’s DLT solution allowed Nostro Account owners and their servicers to share a private confidential ledger recording transactions related to their Nostro accounts. It leverages ISO 20022 standards and gpi innovations – including the unique end-to-end transaction reference (UETR) – and integrates intraday liquidity standards.
The participating banks deployed their own node in the SWIFT DLT sandbox. The initiative was one of the most extensive blockchain proofs of concept powered by Hyperledger Fabric 1.0, SWIFT said.
According to the official release, the PoC “enabled real-time event handling, transaction status updates, full audit trails, visibility of expected and available balances, real-time simplified account entries confirmation, the identification of pending entries and potential related issues, and generated the data required to support regulatory reporting.” It also demonstrated the significant progress DLT has made with regards to data confidentiality, governance, security, and identification frameworks.
However, the PoC also showed that further progress is required on the DLT technology itself before it be used to support production-grade applications in large-scale, mission-critical global infrastructures.
“The PoC went extremely well, proving the fantastic progress that has been made with DLT and the Hyperledger fabric in particular. The DLT sandbox enabled us to control access, to define and enforce user privileges, to physically segregate confidential data and store it only with the relevant parties while supporting a strong identity framework by linking all participants to their BIC, and having all keys signed by a SWIFT certification authority,” said Damien Vanderveken, Head of Research and Development at SWIFT. “Although the PoC demonstrated DLT could improve Nostro liquidity management and reconciliation processes, it also revealed that the pre-requisites will have to be met before banks can enjoy the full benefits of switching to a DLT process.”
