Swift says three central banks are testing its CBDC interoperability solution

Quick Take

  • Swift has announced that three central banks are now beta testing its CBDC interoperability project.
  • The bank messaging network is also exploring multiple CBDC use cases with more than 30 financial institutions.

Swift, the global financial messaging network, said three central banks are now beta testing its central bank digital currency connector solution.

The interoperability project seeks to enable the use of CBDCs for cross-border payments. According to a recent update, three central banks, including the Hong Kong Monetary Authority and the Central Bank of Kazakhstan, are integrating the solution with their own CBDC infrastructure.

“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," Swift Chief Innovation Officer Tom Zschach said.

The bank messaging network developed the CBDC connector infrastructure through a sandbox testing process that commenced in March. Swift said the sandbox proved the solution’s "clear potential and value." The first phase saw the participation of 18 global financial institutions. This included the Royal Bank of Canada, Banque de France, Société Générale, BNP Paribas, Monetary Authority of Singapore, HSBC, Deutsche Bundesbank and NatWest.

According to a Swift report from March, during this 12-week collaborative testing period, participants successfully processed a total of 4,736 transactions between the Quorum and Corda blockchain networks, as well as between Corda and a fiat currency.

Swift exploring multiple CBDC use-cases

Swift added that it is now progressing to a second phase of CBDC sandbox experiments, exploring multiple use-cases. "We have also initiated a second phase of sandbox testing, in which commercial banks, central banks and financial market infrastructures are exploring additional use cases, including trigger-based payments for digital trade platforms, foreign exchange models, delivery vs payment and liquidity saving mechanisms," the announcement said. The second phase involves more than 30 institutions, including the Reserve Bank of Australia, Deutsche Bundesbank, HKMA, and Bank of Thailand.

Swift messaging connects more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories. With the rapid development of CBDC technology, the banking network aims to maintain its dominant position in the evolving global payments landscape. However, the Bank for International Settlement's Unified Ledger global CBDC system could compete with Swift's core business, which revolves around international money transfer instructions.

The Unified Ledger aims to bring together international central bank money, commercial money, and different assets on the same platform, all tokenized and seamlessly interacting. “This would be a game-changer in how we think about money and how transactions take place,” BIS Head of Research Hyun Song Shin said.

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