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R3/SWIFT deal threatens to bring back an old conflict

Partnership still won’t bring DLT’s decentralization to the decades-old industry

If SWIFT had a storefront in Ukraine, this would be their shingle (via Shutterstock).

If SWIFT had a storefront in Ukraine, this would be their shingle (via Shutterstock).

Enterprise blockchain provider R3 will partner with SWIFT, the service banks have long used to process secure interbank payments, to bring distributed ledger technology to the most powerful middleman in the financial world..

The goal is to test whether SWIFT’s new global payments interaction (gpi) platform can be opened to companies using blockchain-based trading platforms. SWIFT gpi is designed to greatly speed its traditional settlement process, which can currently take hours if not days.

“Following the recent launch of our Corda Settler, allowing for the payment of obligations raised on the Corda platform, it was a logical extension to plug into SWIFT gpi,” said David Rutter, CEO of R3, on Jan. 30. “All the blockchain applications running on Corda will thus benefit from the fast, secure and transparent settlement provided through the SWIFT gpi banks.”

This would seem to put R3 back into conflict with Ripple, which has made no secret of the fact that it is targeting SWIFT with its own blockchain-based financial settlement platform designed to cut out the middleman and enable nearly immediate, direct bank-to-bank transactions.

While Ripple and R3 recently ended a multi-billion dollar lawsuit over the sale price of a large amount of Ripple’s XRP cryptocurrency, the companies made up last year when R3 integrated XRP as the first payment token on its Corda Settler platform. That was assumed to be the cause of an XRP price spike of more than 10 percent on the morning the deal was announced.

The news of the SWIFT-R3 deal was announced on stage at during a panel hosted by CNBC at the Paris Fintech Forum. Ripple CEO Brad Garlinghouse, who was onstage with SWIFT CEO Gottfried Leibbrandt, pointed to the fact that even with the addition of R3, SWIFT gpi remains a centralized system, which he said are weaker than the decentralized blockchain platform, CNBC reported.

While Garlinghouse reportedly said he would “be open to working with SWIFT,” he commented,

“Decentralized systems I think over time are likely to win, I think that today that is not what SWIFT is. SWIFT today is a one-way messaging framework, it isn’t a liquidity provide. When we think about an internet of value, it’s a mixture of two-way messaging frameworks—moving to a real-time chatting protocol if you will—coupled with real-time liquidity.”

Ripple declined to comment on the announcement beyond that.

Leo Jakobson, Modern Consensus senior editor, is a New York-based journalist who has spent much of the last 15 years covering the employee engagement and recognition business. Before that he covered the East Coast side of the Internet boom and bust, and wrote about politics in New York City. Disclosure: Jakobson owns no cryptocurrencies.

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