SWIFT: Interoperability, Not Technology, Is the Real Barrier for Deposit Tokens

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has clarified that the primary obstacle to widespread adoption of deposit tokens is not technological development, but rather the lack of interoperability between banks. In a recent company post, Jack Pouderoyen, SWIFT’s Head of Digital Asset Strategy, stated that the core challenge lies in creating a form of money that functions seamlessly beyond the boundaries of a single bank’s network.

The Interoperability Gap

Pouderoyen emphasized that while many financial institutions are actively developing deposit tokens, a critical limitation remains: even when deposits are tokenized, transfers are still constrained by the issuing bank’s Know Your Customer (KYC) procedures and existing interbank agreements. This means that a tokenized deposit from Bank A cannot be easily used or accepted at Bank B without complex, bilateral arrangements. The issue, according to SWIFT, is not about building the tokens themselves, but about establishing common standards, operating rules, and broad participation across the banking ecosystem.

SWIFT’s Proposed Role

Rather than advocating for the creation of a new payment network, SWIFT proposes to act as a standards-setting body and coordinator for interbank transactions involving deposit tokens. Under this model, the legal authority for final payment settlement would remain firmly with existing banks and payment systems. SWIFT’s existing infrastructure, which already connects over 11,000 institutions globally, could be leveraged to ensure compatibility without requiring a complete overhaul of the financial system.

Why This Matters Now

The timing of SWIFT’s statement is significant. Central banks and commercial banks worldwide are actively experimenting with tokenized deposits and central bank digital currencies (CBDCs). However, the risk of fragmentation is high. Without a unified approach, multiple incompatible token systems could emerge, limiting the utility of digital money for cross-border payments and corporate treasury operations. SWIFT’s intervention signals a push toward industry-wide coordination before fragmentation becomes entrenched.

Implications for the Banking Sector

For banks, the message is clear: developing deposit token technology internally is only half the battle. The real value of tokenization — instant, programmable, and secure transfers — can only be realized if tokens are universally accepted. This requires agreement on technical standards, legal frameworks, and operational procedures. SWIFT’s proposal offers a pragmatic path forward that avoids disrupting existing payment infrastructures while enabling innovation.

Conclusion

SWIFT’s analysis reframes the deposit token debate from a technology challenge to a coordination challenge. The financial industry must now decide whether to embrace common standards that enable interoperability or risk creating a fragmented landscape of isolated token systems. SWIFT has positioned itself as a neutral facilitator, but the ultimate success of deposit tokens will depend on the willingness of banks to collaborate on shared infrastructure.

FAQs

Q1: What is a deposit token?
A deposit token is a digital representation of a commercial bank deposit on a distributed ledger or other programmable platform. It aims to combine the safety of bank deposits with the efficiency of digital transfers.

Q2: Why can’t tokenized deposits be used across different banks today?
Because each bank’s token is governed by its own KYC rules and bilateral agreements. Without common standards, a token issued by one bank is not automatically accepted by another, limiting its usability.

Q3: Will SWIFT create a new payment network for deposit tokens?
No. SWIFT proposes to use its existing network to set standards and coordinate transactions, but the legal settlement of payments would remain with the existing banking system and payment infrastructures.