SWIFT announced on 6 March a proof-of-concept (PoC) on e-Voting using distributed ledger technology (DLT), according to SWIFT’s press release.
The PoC will be conducted in the Asia Pacific region by SWIFT, leading securities software provider SLIB and the Singapore Exchange (SGX). Deutsche Bank, DBS, HSBC and Standard Chartered Bank will also join the effort in order to examine how DLT can help simplify shareholder voting on corporate decisions.
Why is SWIFT so important?
It is the system that makes international financial transactions possible. As a messaging platform it allows financial institutions to send, receive and track data regarding financial transactions in a way that is secure and standardized.
Shareholder voting
Shareholders vote on corporate policy, the makeup of their board of directors, issuing securities and changing the corporation’s operations, matters which are traditionally “cumbersome,” according to SWIFT. The current system is based on “time-consuming and resource intensive” procedures which are not electronic. As SWIFT explained: “Proxy voting, in particular, frequently results in error-prone and complex manual processes, which the industry can avoid by fostering greater transparency and automation.”
Managing Director, Securities, Treasury & Standards, Asia Pacific at SWIFT, Lisa O’Connor said: “The expression of shareholders’ rights is often limited today by non-transparent, complex and inefficient paper-based processes. The emergence of blockchain technology is a new opportunity to look at improving these processes. It is also an opportunity for SWIFT to offer flexibility in the adoption of this new technology through the re-use of ISO 20022 based solutions together with a high level of security and resilience that our industry requires.”
What is proof-of-concept (PoC)?
Proof of concept is an exercise to test a certain method or idea and demonstrate whether it is possible or verify whether a theory can be practically applied.
SWIFT’s PoC
The trial will test four areas. First, it will establish whether DLT voting with issuers and a central securities depository (CSD), where data can be stored and managed on permissioned private blockchain, is feasible.
Secondly, they will check how hybrid solutions merging financial messaging standard ISO 20022 with DLT are viable and can boost interoperability while avoiding “market fragmentation.”
Thirdly, it will “test SWIFT’s capacity to host third-party applications in its sandbox and reuse its security and interface stack.”
Fourthly, it will “confirm the use of ISO 20022 as the foundation for standardising for Application Programming Interfaces (APIs) that expose DLT node contents to parties with direct access to the ledger.”
Jeslyn Tan, Global Head of Product Management, Securities Services at Deutsche Bank, said:
“We believe that DLT-based solutions have great potential for the securities services industry and we are proud to be collaborating with SWIFT, SLIB, SGX and key market participants on this first-of-itskind project in Singapore. Sharing best practices and working closely with market participants will allow us to create a more efficient ecosystem, which will benefit banking clients.”
Soh Ee Fong, Group Head of Securities and Fiduciary Services at DBS, said:
“An innovative and seamless e-Voting platform in this industry is long overdue and DBS is pleased to join SWIFT in the PoC as both issuer and participant. … With this solution, shareholder meetings will not be the same again.”
Blockchain Wars
According to Cointelegraph, at the end of January, Iran was arguably going to release a state-backed cryptocurrency in order to avoid US sanctions and the SWIFT system, but it was not officially reported. SWIFT had announced back in November that it was suspending access to some Iranian banks after the US reimposed oil and financial sanctions against Iran in order to curb its missile and nuclear programmes. SWIFT was warned by US Treasury Steven Mnuchin that it would be reprimanded if it provided services to the blacklisted Iranian banks. Once these specific Iranian banks are cut off from SWIFT, as it happened back in 2012, the country could be “crippled financially because money transfer information can’t be forwarded to its banks….it can’t pay for imports and can’t receive payment for exports.” This is where blockchain and cryptocurrencies come in. However, Iranian lawmakers are currently looking into legislation to block the use of cryptopayments inside the country, while the crypto community is calling the Central Bank of Iran to refrain from taking quick measures for regulating cryptos.