Swift: brings together 18 Central Banks

Swift’s CBDC and the 18 banks encouraging its development

Swift is implementing the beta version of the Central Bank Digital Currency (CBDC), together with the support of 18 central and commercial banks encouraging its development.

Among others, there is the Italian bank Intesa Sanpaolo, as well as Banque de France, Deutsche Bundesbank, Monetary Authority of Singapore, BNP Paribas, HSBC, NatWest, SMBC, Société Générale, Standard Chartered and UBS.

In practice, the cooperative society published the results of the 12-week collaborative test, during which nearly 5,000 transactions were simulated between two different blockchain networks and with existing fiat-based payment systems.

Specifically, participants processed a total of 4,736 transactions between the Quorum and Corda blockchain networks by performing CBDC-to-CBDC, and between Corda and fiat currency by performing CBDC-to-fiat.

The 18 banks involved in the trial expressed strong support for the continued development of the solution, noting that it enabled the frictionless exchange of CBDCs, even for those implemented on different platforms.

Swift’s CBDC ready for Beta version and Intesa Sanpaolo’s involvement

Swift’s innovation enables the easy exchange of CBDCs on existing API-based financial infrastructure and efficiently scales international transactions to over 200 countries.

Not only that, Swift announced in October that it had developed a solution to enable CBDCs to switch from DLT-based systems to fiat currency-based systems using the existing financial infrastructure.

The test sandbox was set up so that central and commercial banks could experiment with the solution to validate its effectiveness and share knowledge to further its development.

One of the main strategic goals for Swift was interoperability. In this regard,

Tom Zschach, Chief Innovation Officer of Swift, said:

“Our experiments have highlighted the crucial role Swift can play in a financial ecosystem where digital and traditional currencies co-exist. Our API-based CBDC connector proved robust in about 5,000 transactions between two different blockchain networks and traditional fiat currency, and we are pleased to have the support of our community to develop it further. Many participants have clearly expressed a desire to continue to collaborate on interoperability, and we appreciate that.”

Stefano Favale, Executive Director of Intesa Sanpaolo, also commented as follows:

“When it comes to CBDC, interoperability becomes a key factor in avoiding liquidity traps and creating a network effect. We truly believe that Swift, with its experience and capabilities, is the ideal and market-neutral candidate to support future digital asset developments.”

According to the Atlantic Council, more than 110 countries are currently exploring CBDCs and almost a quarter plan to launch them within the next one to two years. However, most focus mainly on their domestic use, a situation that could lead to a fragmented landscape of “digital islands”.

The case of Brazil and Stellar’s Digital Real on blockchain

Recently, the Brazilian Central Bank also launched a pilot test for its CBDC: the Digital Real on the Stellar blockchain.

In practice, the Digital Real pilot test is expected to replicate the success of the Brazilian instant payment system Pix. Pix allows instant payments between individuals and companies 24/7, without the need for intermediaries.

With Digital Real, Brazil’s central bank therefore intends to make digital payments even more accessible to millions of Brazilians, including those who do not have access to a bank account.

And indeed, in Brazil, around 45% of the population (almost half) does not have a bank account, and with the Digital Real they will still be able to make digital payments. Not only that, the Digital Real will make payments more efficient and convenient, as they are faster and cheaper than traditional methods such as cash and cheques.