SWIFT: Network is capable of dealing with CBDCs

  • SWIFT featured France and Germany’s apex banks, as well as global lenders, including HSBC, and UBS, in a recent experiment.
  • SWIFT, in its experiment, collaborated with Capgemini to facilitate CBDC-to-CBDC transactions between different DLT networks on Quorum technologies.

Global provider of secure financial messaging services, SWIFT, has unveiled a blueprint for the integration of the Central Bank Digital Currencies (CBDCs) network into the existing financial infrastructure. This blueprint by SWIFT manifested after it engaged in an 8-months experiment on emerging technologies and currencies. Occasioned by experimentation, the financial messaging protocol has proven that CBDCs, as well as tokenized assets, can thrive easily in the international financial ecosystem.

Notably, SWIFT featured France and Germany’s apex banks, as well as global lenders, including HSBC, and UBS, in the experiment. As reported, the experiment evaluated the feasibility of exploring CBDCs at the international level. It also assessed the approaches to converting digital currency into fiat money when necessary.

SWIFT addresses interoperability challenges incurred in cross-border transaction

Now, findings derived from the experiments help to address the interoperability-related issues incurred during cross-border transactions. This is achieved by bridging the gap between different distributed ledger technology (DLT) networks and existing payment systems. Consequently, virtual assets will begin to flow and interact with traditional currencies without any hitch.

Interestingly, this development helps to facilitate the scaly deployment of CBDCs as they develop, thereby enhancing trade and investment in over 200 countries across the globe. As of today, SWIFT’s network thrives in over 200 countries and connects more than 11,500 banks and funds. Therefore, the findings complement the core capabilities of the global messaging protocol.

Today, nine central banks out of ten actively explore virtual assets with different technologies, particularly for domestic usage. Meanwhile, for CBDCs to actualize their full potential, they must complement not only themselves but also fiat currencies. SWIFT, in its experiment, collaborated with Capgemini to facilitate CBDC-to-CBDC transactions between different DLT networks on Quorum technologies. More so, the firm, through the partnership, carried out fiat-CBDC transactions among the networks.

Notably, these experimentations help to illustrate that blockchain can be interlinked to foster cross-border payments in a single gateway. It also indicates that the transaction management prowess of SWIFT possesses the capacity to facilitate any inter-network interaction.

SWIFT solutions interconnect multiple tokenisation platforms

SWIFT also carried out a different experiment with a group of participants. With this, the protocol proves that it possesses a mechanism capable of interconnecting multiple tokenisation platforms and numerous cash payments. Reportedly, it collaborated with Citi, Clearstream, Northern Trust, and SETL, thereby harnessing 70 situations, simulating “market issuance and secondary market transfers of tokenised bonds, equities, and cash.” The outcome of the experiment illustrates the efficacy of its infrastructure in creating, transferring, and redeeming tokens. It also showed that the infrastructure helps to avail robust interoperability between numerous tokenisation platforms.

The Chief Innovation Officer with SWIFT, Tom Zschach, extols the potential of virtual assets in shaping the way we pay and invest in the future. However, Zschach said the potential tends to manifest only when different approaches used begin to connect and work together. The official added that SWIFT sees “inclusivity and interoperability as central pillars of the financial ecosystem.” According to Zschach, the solutions availed by SWIFT help to enable central banks to connect their networks to other payment systems. This, as revealed by him, will be done, through a single gateway, thereby facilitating fast cross-border payments.

Additionally, Zschach noted that the experiments manifested as part of “SWIFT’s extensive innovation agenda.” According to him, the move helps to support SWIFT’s “strategic focus on enabling instant, frictionless and interoperable cross-border transactions.” He added that the cooperative, which connects more than 11,500 financial institutions became developed to “bridge geographies, technologies, and currencies.”

Meanwhile, SWIFT is not the only protocol dealing or aiding the smooth flow of CBDCs. Ripple, a leading provider of crypto solutions remains very active in the development of the assets. Last year, it piloted a private version of the XRP ledger, thereby availing a platform for Central banks to securely issue CBDCs. More so, Ripple collaborated with the European think tank Digital Euro Assocation to drive the growth of CBDCs and digital Euro.

Similarly, Stellar, a decentralized protocol is not left out in the trend. Stellar suites CBDC dealings because it usually capitalizes on the trust inherent in asset issuers. Few months ago, the protocol emerged as the network of choice to explore use cases for a CBDC in Brazil.