The financial industry needs to agree on the format of shared data, business processes, roles and responsibilities so that technologies for distributed ledgers like blockchain can be used to efficiently address complex problems in financial services, Swift says in a new report.

Swift released a new paper investigating the application of business standards to distributed ledger technology (DLT) and smart contracts (SC).

Both DLTs and SCs are currently generating a huge amount of interest amongst financial institutions and technology providers with their promise to transform automation within the financial services industry. To enable application on an industrial scale, however, a level of standardization is required.

Market participants will need to work together to define and agree on the meaning and format of the data deployed on DLT platforms, outline formalised business processes, and clarify legal implications.

The paper examines the role of standards from two distinct angles: the necessary preconditions for standardization of DLT/SC, and the possibility of repurposing some of today’s existing standards.

The preconditions for standardization of DLT/SC and previous industry standardization initiatives were among topics raised in the report.

“The promise of DLT is the synchronisation of financial data between multiple organizations, whilst smart contracts can further provide self-executing efficiencies on the ledger,” says Stephen Lindsay, head of standards, Swift.

“This paper addresses some integral questions about how DLT/SC automation can run smoothly in a multi-party network environment and highlights the importance of avoiding ‘reinventing the wheel’ when it comes to business definitions that facilitate interoperability. The paper recognises that full-scale standardization of DLT/SC use cases is premature; however, SWIFT stands ready to work with the community to conduct further studies into the reuse of existing business standards in order to better facilitate the efficient workings of DLT/SC technologies for the financial industry as a whole.”

In order to avoid the fragmentation of global standards, Swift sees the potential of DLT/SC as a clear opportunity for the financial community to coordinate efforts over common messaging and data standards.