The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global provider of financial payment services, has revealed that its central bank digital currency (CBDC) connector has entered the beta testing phase. SWIFT reports that three central banks are currently testing this interlinking solution, while over 30 financial institutions are experimenting with its various applications in a sandbox environment.
SWIFT’s CBDC Connector Addresses Interoperability Challenges
SWIFT’s CBDC connector has been developed to address the challenges of interoperability between existing fiat currencies and new CBDCs. This solution has been created based on the experiences gathered during SWIFT’s initial CBDC sandbox, which was completed earlier this year. During this sandbox, nearly 5,000 transactions were simulated between two blockchain systems, Quorum and Corda, and existing Real-Time Gross Settlements (RTGS) fiat systems.
Among the central banks already integrating SWIFT’s CBDC connector into their financial infrastructure for testing are the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan. These institutions aim to evaluate the functions and performance of the solution firsthand.
Launch of Second CBDC Sandbox for More Experimentation
SWIFT has also announced the launch of a second CBDC sandbox, where over 30 financial institutions will experiment with different use cases and applications for interconnected digital currencies. Notable institutions participating in this initiative include the Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand, and CLS, among others. The goal of this sandbox is to explore various implementations of CBDC technology.
The results report from the first CBDC sandbox, titled “Connecting Digital Islands,” highlights SWIFT’s commitment to ensuring that new digital currencies can seamlessly coexist with each other and with existing fiat-based currencies and payment systems. The focus is on achieving interoperability to prevent liquidity from becoming isolated within individual networks without the means to interact with other systems.
Tom Zschach, Chief Innovation Officer at SWIFT, emphasized their focus on interoperability and the need to refine their solution for scalability. He stated:
“Our focus is on interoperability – ensuring that new digital currencies can seamlessly coexist with each other and with today’s fiat-based currencies and payment systems.”
With 19 out of the 20 G20 nations actively engaged in CBDC research and nine running CBDC pilots, SWIFT recognizes the importance of developing solutions that allow for the interaction and scaling of CBDCs within the financial ecosystem as they are deployed.
SWIFT’s efforts in CBDC development and interoperability are significant steps toward creating a framework that ensures the smooth integration of digital currencies into the global financial landscape.