Experimenting with cross-border transactions between CBDCs
Interbank messaging service SWIFT today announced progress in its experiment with inter-central bank digital currency (CBDC) transactions. The 18 participating central and commercial banks reported that they found “distinct value” in the CBDC connectivity solution offered by Swift.
Swift conducted a 12-week joint CBDC test. More than 18 global financial institutions participated, including Banque de France, Societe Generale, BNP Paribas, Monetary Authority of Singapore, HSBC and Deutsche Bundesbank.
What is SWIFT?
An abbreviation of “Society for Worldwide Interbank Financial Telecommunication”, it is a non-profit corporation that provides a communication network that enables international remittance between banks. The network connects more than 11,000 financial institutions in over 200 countries around the world.
The experiment simulated about 5,000 transactions between two different CBDC blockchains and between CBDC and fiat payment systems. Bank participants support the continued development of the solution, arguing that CBDCs built on different platforms can be traded smoothly.
Swift also envisions developing a beta version of its payment solution and conducting further tests involving banks in the coming months. We also plan to test our CBDC settlement solution, which will focus on use cases such as securities settlement, trade finance and conditional settlement.
Swift also explained the background of the CBDC interoperable system development. More than 110 countries are currently considering CBDCs, but many of them are primarily focused on domestic use, which could leave their respective CBDC systems in isolation. are doing. It’s like they need a solution to deal with this.
Lewis Sun, head of global payment solutions at HSBC, who participated in the experiment, commented:
Currently, CBDC is undergoing trial and error with various technologies and standards, increasing the risk of each system becoming isolated.
Swift will continue to work with central and commercial banks to create a platform that enables faster, cheaper and more secure cross-border payments.
Also, Stefano Favale, Director of Banco Intesa Sanpaolo, said at the CBDC, “Interoperability is a key factor in avoiding liquidity traps and creating network effects.”
Swift is also conducting a cross-chain interoperability proof-of-concept with Chainlink Labs, which provides a decentralized oracle network. As a background to this experiment, Swift expects tokenized and traditional assets to coexist in 2021, the next decade, and wants to explore whether it can support the market as an intermediary.
connection：Chainlink (LINK) Participates in SWIFT Proof-of-Concept
CBDC interoperability experiment continues
Over the last few years, various institutions have been experimenting with CBDC interoperability.
On March 6, the Bank for International Settlements (BIS) reported on the results of an experiment conducted jointly with several central banks on CBDC cross-border transactions. Conducted by BIS in collaboration with the Bank of Israel, the Bank of Norway, and the Riksbank of Sweden, it outlines the benefits, requirements for each CBDC system, and future considerations.
connection: Bank for International Settlements, et al., Experimental Report on CBDC Cross-border Payments
Also, in November 2022, the Federal Reserve Bank of New York announced its participation in an experimental project to verify the interoperability of CBDC. The experiment is being conducted jointly with payments giant Mastercard, Citi, HSBC, BNY Mellon and other major financial institutions.
connection: New York Federal Reserve Bank, Mastercard, etc. to CBDC demonstration experiment