In what ways could cryptocurrencies potentially replace or bypass SWIFT?

Theoretically, they can. In reality, it won’t happen. What might happen is that SWIFT will embrace blockchain technology (perhaps build their own L1) and use that. But it already has a fantastic connection to 25,000+ banks in the world, which took years and years to build. These connections are highly compliant and have been through quite a few regulatory iterations. It is not as if one day, something much more efficient will come along, and it will dethrone SWIFT.

With the advent of time, SWIFT might incorporate L1 (possibly a private L1) and then have the various CBDCs working on it and use it for settlement purposes. This would be the most logical extension of what SWIFT can do without inserting itself into the actual flow of funds.

But SWIFT doesn’t move money. Think of it as a messaging system that helps with money movement. The actual money movement is simple ledger adjustments by banks & central banks.

Here is a video I did a couple of years ago that explains how SWIFT works.

https://www.youtube.com/watch?v=...

Credit: Faisal Khan