By
Godfrey Benjamin
April 26th, 2024
SWIFT has been actively involved in various CBDC-related projects, including a wholesale CBDC initiative in collaboration with the New York Federal Reserve Bank, utilizing a regulated liability network.
SWIFT, a prominent bank messaging platform connecting over 11,500 financial institutions worldwide, announced that three banks have joined the beta phase of its central bank digital currency (CBDC) interoperability project. This move aims to enhance the seamless integration of CBDCs into the existing financial ecosystem.
According to the official announcement on September 13, the company also expanded its sandbox testing program with 30 financial institutions experimenting with the solution to explore further use cases.
SWIFT is taking its commitment to developing a beta version of its CBDC connector solution to the next level. Following a successful initial round of sandbox testing, where participants recognized the program’s clear potential and value, the company is now actively progressing its beta solution to its second phase.
Three Central Banks Join SWIFT’s CBDC Testing Program
The company said three central banks and monetary authorities have integrated their infrastructure with SWIFT’s “CBDC connector solution” for direct testing in this new phase. These banks are the Central Bank of Kazakhstan, the Hong Kong Monetary Authority (HKMA), and an unnamed central bank. This collaborative effort marks a significant step forward in advancing the interoperability of CBDCs on a global scale.
The initial phase of sandbox testing commenced in March, with an impressive lineup of over 18 participants, including institutions such as the Royal Bank of Canada, Banque de France, Société Générale, BNP Paribas, Monetary Authority of Singapore, HSBC, Deutsche Bundesbank, and NatWest. During this phase, the sandbox facilitated over 5,000 transactions over 12 weeks. As the project enters its next stage, the number of participating institutions will exceed 30, showcasing the growing interest and commitment to CBDC integration.
SWIFT to Focus on Interoperability for CBDC Program
SWIFT cited the Atlantic Council report, which said that 130 countries, accounting for 98% of global GDP, had already explored CBDCs in the announcement. Among these countries, nineteen G20 nations are currently in advanced stages of CBDC development, with nine already actively piloting these digital currencies.
However, there is a looming concern that this extensive development may result in a fragmented international landscape, primarily driven by individual countries’ focus on domestic applications.
To address the issue of fragmentation, Swift has made interoperability a central focus within its innovation agenda for digital currencies and tokenized assets. The goal is to enable these assets to scale seamlessly if and when introduced into the financial ecosystem.
“Our focus is on interoperability – ensuring that new digital currencies can seamlessly coexist with each other and with today’s fiat-based currencies and payment systems,” said Tom Zschach, the Chief Innovation Officer at Swift.
A Significant Milestone Achievement
SWIFT has been actively involved in various CBDC-related projects, including a wholesale CBDC initiative in collaboration with the New York Federal Reserve Bank, utilizing a regulated liability network.
Despite the company’s established position in the financial messaging industry, the emergence of CBDCs has introduced competition, raising questions about the future of traditional messaging systems. However, this competition is viewed as a catalyst for innovation in the industry.
Meanwhile, in August, SWIFT announced a successful demonstration of its ability to transfer tokenized value across a diverse range of public and private blockchains.
According to the messaging platform, this milestone achievement can significantly accelerate the growth of tokenized asset markets, allowing them to achieve global scalability as they continue to evolve and mature.