Recently, SWIFT (The Society for Worldwide Interbank Financial Telecommunications), a bank messaging platform, announced that it had observed encouraging outcomes from its trial run connecting various CBDCs (central bank digital currencies).
Over 18 Financial Institutions Took Part In The First CBDC Trial
Throughout a 12-week trial, SWIFT conducted approximately 5,000 simulated transactions between established fiat payment systems and two distinct blockchain networks. More than 18 financial institutions from around the world took part in the research.
Some of them include NatWest, BNP Paribas, the Monetary Authority of Singapore (MAS), Société Générale, the Royal Bank of Canada, Deutsche Bundesbank, and HSBC. SWIFT wrote, “in general, the outcomes of the sandbox testing revealed that SWIFT’s trial integration solution can fulfill the requirements of commercial and central banks for CBDC interoperability, thereby ensuring the effective utilization of CBDCs in cross-border payments.”
Moreover, SWIFT indicated a “significant level of agreement” among the participants regarding the potential operational framework of CBDCs in the future. SWIFT’s forthcoming plans involve executing a subsequent stage of its CBDC sandbox and advancing its “CBDC interlinking solution” into a payment beta version with improved atomicity.
The OMFIF Digital Monetary Institute anticipates that within the upcoming few years, nearly a quarter (24%) of central banks will establish their own CBDC solutions. Countries like Nigeria and China are among the first to have launched a CBDC.
However, both countries are still struggling to increase adoption. More than 110 central banks globally are exploring the potential applications of CBDCs.
Huge Prospects For Cross-Border Payment Using CBDCs
Meanwhile, Lewis Sun, HSBC’s Global Head of Domestic and Emerging Payments, expressed his perspective. He said, “the achievement of real-time cross-border payments using CBDCs is reliant on interoperability.”
He further said that although there is a growing interest in CBDCs, the danger of fragmentation is also increasing as an increasingly diverse array of technologies and standards is being tested. Meanwhile, SWIFT in 2022 revealed that it was considering adopting blockchain technology for CBDC interoperability and cross-border payment.
The platform acknowledged the potential of blockchain technology for faster and more seamless transactions. Last October, SWIFT announced that it had conducted two separate experiments, both of which involved the transfer of tokenized assets and CBDCs over established financial infrastructure.
As earlier stated, both transactions were a success. SWIFT’s findings indicate that “central banks and financial entities can implement CBDCs on a large scale to promote trade and investment among over 200 nations and territories across the globe.”
SWIFT is a Belgium-based messaging system that links over 11,500 financial institutions globally. Besides, the messaging system performs a pivotal role in enabling international transactions.
