Decentralised oracle provider Chainlink has announced a new blockchain payment solution aimed at financial institutions. This development is made possible through a partnership with Swift, a global messaging network widely used by banks.
New Integration to Bridge Traditional Finance and Blockchain
Chainlink and Swift are working together to allow institutions to use Swift messages to interact with blockchain technology. This new integration will let institutions settle digital assets with minimal changes to their current systems. It aims to create a bridge between decentralised finance (DeFi) and traditional finance (TradFi).
Sergey Nazarov, co-founder of the blockchain firm, spoke at the Sibos conference in Beijing, organised by Swift. He explained that the solution is in its pre-production stage and can soon be used by financial institutions.
“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,” Nazarov said.
The solution allows pre-settlement and transaction confirmation using Swift’s messaging standards, which are already widely adopted in TradFi. After confirmation, Chainlink will convert these messages into blockchain actions, enabling institutions to lock assets and make onchain payments.
Introducing Blockchain Privacy Manager (BPM)
Nazarov also introduced Chainlink’s new Blockchain Privacy Manager (BPM), which provides privacy features for integrating private chains with Chainlink’s public platform.
He emphasised the need for improved privacy in the blockchain industry, saying, “Privacy has been deeply lacking quality in the blockchain industry,” and that this has limited the adoption of blockchain by capital markets.
BPM allows financial institutions to control the flow of data to specific blockchain networks while keeping other information private. It uses Chainlink’s Cross-Chain Interoperability Protocol (CCIP) Private Transactions for encryption, ensuring end-to-end privacy.
Chainlink Addressing Privacy and Regulatory Concerns
With this new functionality, institutions can handle sensitive transactions, such as private tokenized asset trades or cross-border payments, with added privacy. However, this development may raise concerns with regulators, particularly regarding Anti-Money Laundering (AML) and Know Your Customer (KYC) rules.
The centralization of privacy within the protocol’s system may also raise questions about whether this approach aligns with the decentralised nature of blockchain.
