Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
Last year, Swift collaborated with American professional services company Accenture to establish a cross-border transaction between CBBC and “an established real-time gross settlement (RTGS) system.”
Eighty-seven countries are reportedly exploring the possibilities of integrating Central Bank Digital Currencies into the financial systems. According to reports, seven countries have fully launched their digital currencies. This has caught the attention of The Society for Worldwide Interbank Financial Telecommunication (SWIFT) and is teaming up with Capgemini, a French IT company to experiment with international networks for CBDC payment.
The partnership is meant to link CBDC networks, CBDC, and traditional currency networks. Last year, Swift collaborated with American professional services company Accenture to establish a cross-border transaction between CBDC and “an established real-time gross settlement (RTGS) system.” The success of this experiment will demonstrate that SWIFT has the capability to interlink with networks.
“This would help solve huge technology and industry challenges facing CBDCs. And it could enable us to help central banks make their CBDC networks cross-border payment ready,” said SWIFT head of innovation Nick Kerigan.
Thomas Zschach, SWIFT chief innovation officer, in a statement, said that many central banks are creating their CBDCs that follow different technologies, standards, and protocols. According to the company, it is developing a common point where the CBBC networks can “intercept, translate and forward them to the SWIFT platform for onward transmission.”
Capgemini Chief Technology & Innovation Officer Sudhir Pai has also observed that navigation of decentralization is very complex. In his statement, he explained that the complexities lie in the several “tech choices, operating models, and policy considerations.”
Swift currently provides services to over 200 countries and connects over 11000 banks. The developing system is, therefore, expected to comply with its standard, authentication model, and infrastructure.
According to reports, the company was able to process over 42 million messages a day last year, however, transactions on the network were reported to be slow as it took about several days to be processed. Besides the experiment being initiated by SWIFT and Capgemini, Ripple (XRP) has been said to be another perfect candidate that could help CBDCs to interact outside their traditional network.
A pilot scheme conducted last year by the Bank of International Settlements (BIS) disclosed that CBDC could reduce the cost of cross-border transactions by 50%, and as well slash the time needed to facilitate such transactions to seconds. The pilot scheme initially involved Hong Kong and the Thai Central Bank, ensuring that transaction data across participants in the payment chain are synchronized using blockchain.
Recent development reveals that countries like China and South Korea are in the advanced stage of their digital currencies implementation. Norway, the world’s most cashless society, is also working to implement its digital currencies. It is expected that all the countries involved will cooperate to examine interoperability between systems to reduce friction to successfully facilitate cross-border payments.