Finance

Swift Successfully Completed Testing for CBDC Cross-Border Use

03/11/2023
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  • Swift’s CBDC sandbox tests with 18 central and commercial banks show clear value in their solution.
  • The solution enables interoperability with CBDC networks and existing systems for cross-border payments.
  • Swift announced yesterday that it is connecting digital islands due to its latest experiments.

Swift is a banking network that is working towards the future of payments and securities. It is now seeking to build a system that will connect the digital currencies of different countries. The interbank messaging company runs a project that connects Central Bank Digital Currencies (CBDCs) and offers “clear potential and value.”

Swift is Exploring into CBDCs

On March 9th, Swift shared the information about the successful testing for CBDC cross-border use. Swift said that CBDCs are gaining momentum; still, global central banks continue to explore the potential use of central bank-backed digital currencies in their local markets. Swift’s key focus is enabling interoperability with emerging innovations. And the key challenge for the financial industry as digital currencies develop.

The Atlantic Council states that “over 110 countries are exploring a CBDC.” Also, a recent OMFIF Digital Monetary Institute survey found that “almost a quarter are expecting to launch within the upcoming one or two years.”

Notably, most central banks aim primarily on domestic usage, which could lead to a fragmented landscape consisting of “digital islands” if left unaddressed, Swift said.

The “Solution” Developed by Swift

Last October, Swift announced it had “successfully developed a solution to enable CBDCs to move between DLT-based and fiat-based systems using the existing financial infrastructure.” And at present, they have tested that solution in a sandbox environment with 18 central and commercial banks.

The participants showed strong support for the Solution’s progressive development As they stated that the Solution enables seamless exchange of CBDCs, including those built on different platforms.

Tom Zschach, Chief Innovation Officer at Swift said, “Our experiments have shown the critical role that Swift can play in a financial ecosystem in which digital and traditional currencies co-exist.”

Zschach also mentioned that “their solution successfully tested across almost 5,000 transactions between two different blockchain networks and a traditional fiat currency. Many participants have made clear their desire for continued collaboration on interoperability, and this is particularly pleasing.”

Swift mentioned that solution development and testing have been a global collaborative effort. Sandbox participants include the central bank companies such as “the Banque de France, the Deutsche Bundesbank, the Monetary Authority of Singapore, BNP Paribas, HSBC, Intesa Sanpaolo, NatWest, Royal Bank of Canada, SMBC, Société Générale, Standard Chartered, and UBS.”

On the other hand, the additional four central banks were observers, providing input and feedback without participating in the sandbox.

In the 12-week collaborative testing period, participants processed a total of 4,736 transactions between the Quorum and Corda blockchain networks, and between Corda and fiat currency. And in the coming months, Swift will develop a beta version of the solution for payments that can be tested further by central banks.

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Source: https://www.thecoinrepublic.com/2023/03/10/swift-successfully-completed-testing-for-cbdc-cross-border-use/