SWIFT Protocols refer to the standardized messaging formats and network infrastructure established by the Society for Worldwide Interbank Financial Telecommunication, traditionally used for secure global financial transactions between banks. Their purpose is to facilitate reliable and interoperable communication for payment instructions and financial data across the traditional banking system.
Mechanism
Participants transmit standardized messages (e.g., MT or MX formats) over the SWIFT network, which securely routes these messages between financial institutions. While SWIFT itself does not directly handle asset transfers, its messages convey instructions for payments, securities trades, and other financial operations, relying on correspondent banking relationships for actual settlement.
Methodology
The methodology emphasizes a global standard for financial communication, ensuring data consistency and security across diverse financial systems. Although decentralized finance aims to bypass traditional intermediaries, understanding SWIFT’s architecture remains relevant for institutional crypto integration, particularly for fiat on/off-ramps and cross-border settlement involving established banking partners.
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