SWIFT’s Chief Innovation Officer, Tom Zschach, has ignited a crucial discussion regarding the viability of Ripple's XRP token and public blockchain technologies for meeting the stringent demands of global banking. His recent remarks challenge the popular narrative around these innovations, emphasizing the institutional requirements often overlooked in the push for decentralized finance.
Doubts on XRP's Institutional Readiness
Zschach specifically questioned whether major financial institutions would ever feel comfortable entrusting cross-border settlement finality to an "external token" like XRP. He highlighted that XRP is neither a regulated deposit nor an asset typically held on a bank's balance sheet, presenting significant concerns around legal enforceability. Furthermore, he suggested that as regulated stablecoins and tokenized deposits gain traction, banks would likely prefer settling with instruments they already issue and trust, rather than paying a "toll" to an external, less familiar asset.
The Broader Challenge for Public Blockchains
Expanding beyond XRP, Zschach also addressed the general suitability of public blockchains for institutional finance. He contended that the focus on decentralization often overshadows critical considerations of institutional risk management. For him, true neutrality in finance isn't about the number of nodes, but rather whether a network privileges any participant. Zschach likened open blockchains to powerful engines lacking a "cockpit," implying they are incomplete for institutional use without robust legal frameworks, privacy safeguards, and regulatory oversight. This missing "trust layer," he argued, is precisely why traditional systems like SWIFT remain indispensable. He concluded that while blockchains are part of the solution, they will likely complement, rather than replace, established financial infrastructure, as code alone cannot resolve complex, billion-dollar disputes that SWIFT has managed for decades.
