- SWIFT says it is ready to take on CBDC cross border payments
- The development is a sign that central banks are starting to seriously think about infrastructure related to the roll out of nation-backed digital currencies
Financial infrastructure company SWIFT on Wednesday said it has solved a particularly vexing problem for central bank digital currencies (CBDCs): how to transact between different blockchains.
The development is one indicator that central banks are, at last, starting to seriously map out the massive, costly infrastructure required to roll out digital currencies backed by countries, according Kenneth Goodwin, Blockchain Intelligence Group’s director of regulatory and institutional affairs. SWIFT’s own outline has been at least eight months in the making.
Goodwin, who also works with Project Hamilton — an economic think tank that works with the Boston and New York Federal Reserves — said SWIFT’s scale adds weight to its blueprint.
“The central banks are basically saying — these governments are saying, ‘How do we have the right network infrastructure that’s going to prepare us…to actually do these executions on a digital platform that’s very secure?” Goodwin said. “And that’s where SWIFT comes into play.”
One reason the research has taken so long, according to Goodwin: the thorny choice between incorporating CBDCs with SWIFTs’ existing payment rails or competing against a crypto-native competitor such as Bitcoin’s Lightning Network.
Lightning Network, a layer-2 payment protocol built atop Bitcoin’s core blockchain, taps the newly-created Taro protocol for issuing assets such as stablecoins — and potentially CBDCs — on the blockchain, then utilizing Lightning to execute transactions.
“SWIFT has successfully shown that Central Bank Digital Currencies (CBDCs) and tokenised assets can move seamlessly on existing financial infrastructure – a major milestone towards enabling their smooth integration into the international financial ecosystem,” SWIFT said in a statement.
The team conducted two separate experiments and found that digital currencies and assets can flow smoothly alongside, and interact with, their traditional financial counterparts on the network.
SWIFT is already being used to connect more than 11,500 banks and funds across 200 countries.
When it comes to establishing a CBDC system that works worldwide, “it all has to do with infrastructure, but it also has to do with familiarity,” Goodwin said.
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Source: https://blockworks.co/swift-says-it-can-resolve-a-major-obstacle-to-cbdc-adoption/