Citi and Swift have announced the successful completion of a groundbreaking trial that demonstrates the viability of settling payments between fiat and digital currencies within a Payment-versus-Payment (PvP) framework.
This trial showcases an effective hybrid model that enables interoperability between traditional financial systems and Distributed Ledger Technology (DLT) networks. It was made possible by enhancing existing Swift infrastructure with advanced blockchain connectors, orchestrators, and smart contracts designed for institutional use.
The initiative highlights Citi’s dedication to providing innovative, scalable, and client-focused solutions within the digital asset sector. These trials represent a step forward in the development of market-ready solutions that are designed to be scalable, standardized, and seamlessly integrated into global financial systems.
Fast expansion of digital currencies, including tokenized deposits and stablecoins, offers a unique opportunity to transform cross-border payments and financial systems. According to Citi GPS, the market for stablecoins could reach USD 1.9 trillion by 2030, driven by growing use cases and clearer regulatory frameworks. The report also notes that stablecoin transaction volumes are nearing USD 1 trillion per month, though they primarily function as intermediaries. As a result, many recipients of stablecoins—most of which are denominated in US dollars—often opt to convert them into local fiat currencies.
Despite the growing demand for stablecoins, settling payments between fiat and digital currencies remains complex due to their inherent differences. While fiat currencies are typically held in accounts at correspondent banks, digital currencies are stored in user wallets across various blockchains and generally do not permit reversible transactions. Although FX messaging standards like MT30X have been developed to identify digital assets and confirm foreign exchange deals, they are not designed to facilitate synchronized settlements between fiat and digital currencies. The collaboration between Citi and Swift seeks to address these challenges.
Citi and Swift developed a comprehensive messaging standard designed to track the entire process, from trade initiation to settlement confirmation. This standard was specifically tailored to address the unique data fields and characteristics of transactions involving both fiat and digital currencies. The solution also incorporated an escrow mechanism to tackle the challenge posed by the irreversibility of blockchain transactions, ensuring Payment-versus-Payment (PvP) settlement and mitigating settlement risks for both parties involved.
A central orchestrator played a key role in managing the coordinated exchange of messages, facilitating synchronization and finality between the fiat and DLT components of the transaction. During the trial, Citi used test USDC tokens from Circle on the Ethereum Sepolia testnet to create a simulated near-production environment. Citi and Swift plan to continue refining this approach in collaboration with the wider financial industry, working to establish the messaging and operational standards required for scalable, institutional-grade digital asset transactions.
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