Swift Collaborates With 38 Global Institutions To Enhance Its CBDC Interlinking Solution!

In the world of transactions and payments there’s a revolution brewing. Moving from conventional and traditional methods of financial transactions, the world had been introduced to digital currency, decentralized finance (DeFi), cryptocurrency and blockchain technology.

These technologies have made transactional processes quicker, simpler and more secure.

In the middle of this revolution, Swift (Society for Worldwide Interbank Financial Telecommunication) has been planning to deploy a new platform in the next few years with the aim of connecting CBDCs (central bank digital currencies) to existing finance systems and has been trialing it for a while.

Now, the financial institution has an update regarding the second phase of its interlinking system.

So, what did Swift say about the results? Let’s explore!
 

What Did Swift Announce?

 

• Through a press release, Swift announced the results of an industry-wide sandbox testing of its central bank digital currency (CBDC) interlinking solution.

• The test witnessed one of the largest collaborations on CBDCs, which included 38 institutions spanning central banks, commercial banks and market infrastructures.

• Running for over six months, the test was aimed at demonstrating how the solution could be used in more complex use cases. It consisted of over 125 sandbox users and 750+ transactions.

• The test included simulated digital trade, securities, tokenized assets, FX (Foreign Exchange) networks and CBDCs for payments.

• As per the announcement, the results showed its connector “can enable financial institutions to carry out a wide range of financial transactions using CBDCs and other forms of digital tokens, easily incorporating them into their business practices.”

• The interlinking solution shows potential to simplify and speed up trade flows, unlock growth in tokenized securities markets and enable efficient FX settlement. This can be done along with financial institutions using existing infrastructure.

• As Swift aims for instant and frictionless transactions, interoperability becomes an important characteristic, which is evident in its solution as it enables cross-border transfers and connects CBDCs on different networks with each other and with fiat currencies.

• As far as digital trade goes, the experiment demonstrated interoperability between different digital networks and trade platforms.

• The connector could also interlink multiple asset and cash networks, while also being capable of playing a role in foreign exchange (FX).

• Participants of the test included central banks and monetary authorities from Australia, Czechia, France, Germany, Singapore, Taiwan and Thailand, among others. Commercial bank and market infrastructure participants included ANZ; Citibank; CLS Group; DBS; Deutsche Bank; DTCC; HSBC; Hua Nan Commercial Bank; Intesa Sanpaolo; NatWest Group; Santander; Société Générale; Standard Chartered; Sumitomo Mitsui Banking Corporation; The Shanghai Commercial & Savings Bank, Ltd; The Standard Bank of South Africa; United Overseas Bank, and Westpac Banking Corporation.

• Now, Swift plans to include a wider range of emerging digital networks in addition to CBDCs, such as platforms for tokenized deposits.

 

What Did Stakeholders Say?

 

• Tom Zschach, Chief Innovation Officer at Swift, said, “Swift is a community – a convener of and for our industry – and I’m delighted that we’ve been able to facilitate these critical innovation experiments and show that institutions can continue to use much of their existing infrastructure alongside new, innovative technologies.”

• [Contd.] “Fragmentation is a challenge for the entire industry, and ensuring interoperability between networks is vital to addressing this while also enabling new technologies to scale and reach their full potential.”

• Sabih Behzad, Head of Digital Assets & Currencies Transformation at Deutsche Bank, said, “Interoperability between DLT networks is an important piece of the puzzle to enable efficient connectivity between CBDC and other networks and to avoid silos.

• [Contd.] “Testing Swift’s solution for different use cases such as DvP and FX with 38 commercial and central banks is a significant step to overcoming fragmentation and ensuring frictionless transactions.”

• Lewis Sun, Global Head of Domestic and Emerging Payments, Global Payments Solutions at HSBC, said, “The ability to interlink emerging and existing market infrastructures is essential to realizing the potential benefits brought on by tokenization and CBDCs.

• [Contd.] “HSBC is excited to continue the collaboration with Swift and other industry peers to incubate an open, inclusive and technology-agnostic model that allows for more efficient payment-versus-payment, delivery-versus-payment, and trade settlement across different networks.”

Do you think Swift’s interlinking solution could become the industry standard once released?

Let us know in the comments below!