Market analyst Vincent Van Code explores the roles of SWIFT and Ripple in the global financial system and the possibility of their future integration.
SWIFT's Role in the Financial System
Van Code outlines that SWIFT is fundamentally a messaging system rather than a money-moving entity. It facilitates international transactions by sending secure payment instructions between banks, but the settlement process depends on the correspondent banking network. SWIFT does not transact value directly or hold accounts, making it reliant on the existing fiat system and the liquidity provided by individual banks. He also highlights SWIFT's strategic importance to U.S. financial dominance.
RippleNet as a Real-Time Settlement System
Van Code explains that RippleNet operates as a real-time settlement network capable of transferring actual value across borders. It can utilize both XRP and stablecoins to facilitate transactions, offering near-instantaneous transfers at lower costs compared to traditional banking mechanisms. Ripple was initially perceived as a competitor to SWIFT, but the financial industry has recognized that distributed ledger technology (DLT) provides a more efficient settlement infrastructure.
The Potential for SWIFT to Integrate DLT
Van Code says that SWIFT may eventually upgrade its backend to incorporate DLT. This would go beyond simply issuing a digital currency and require a blockchain network optimized for cross-border transactions, liquidity, and scalability. He acknowledges that this would be a significant challenge but implies that such development is within the realm of possibility.
Van Code concludes that major financial integrations of this scale typically take five to ten years to materialize. If Ripple and SWIFT are indeed working together, the early stages of their collaboration may only now be coming into view.
