Swift unlocks more use cases in second phase of CBDC testing

Swift

Swift announced that the second phase of its Central Bank Digital Currency (CBDC) interlinking solution sandbox testing was a success, with the results showing that its connector can enable financial institutions to carry out a range of financial transactions using CBDCs and other forms of digital tokens.

The project is one of the largest collaborations on CBDCs, with participation from 38 institutions including central and commercial banks and market institutions.

The experiments found that Swift’s solution “has the potential to simplify and speed up trade flows, unlock growth in tokenised securities markets, and enable efficient FX settlement – all while allowing financial institutions to continue to make use of their existing infrastructure”.

Results of the second phase

In its earlier testing phase, Swift’s solution was shown to enable cross-border transfers and connect CBDCs on different networks with each other, as well as with fiat currencies. The second testing phase went further to explore “more complex” use cases. These included using the solution to connect and orchestrate transactions across simulated digital trade and tokenised asset and FX networks, alongside CBDCs for payments, with more than 750 transactions being carried out.

Swift said that in digital trade, the experiments “successfully demonstrated interoperability” between different digital networks and trade platforms, with the solution faciliating atomic payments – payments that are completed simultaneously, alongside the transfer of assets, rather than sequentially.

Smart contracts and event-driven programming enabled the automation of payments only once certain conditions had been met, meaning trade flows could potentially become automated 24 hours a day, seven days a week. Participants also highlighted the solution’s potential to reduce delays in global trade, enhance trust among parties, and significantly lower transaction costs.

In securities, Swift noted that its solution was able to interlink multiple asset and cash networks and could facilitate atomic delivery versus payment across those platforms. Additionally, the experiment also demonstrated that the connector could play a role in foreign exchange, with it shown to be interoperable with existing market infrastructure, facilitating FX netting and settlement via CBDCs.

Looking ahead

Swift said going forward, it plans to support more emerging digital networks in addition to CBDCs, such as platforms for tokenised deposits.

Tom Zschach, Chief Innovation Officer at Swift, said he was “delighted that we’ve been able to facilitate these critical innovation experiments and show that institutions can continue to use much of their existing infrastructure alongside new, innovative technologies”.

“Fragmentation is a challenge for the entire industry, and ensuring interoperability between networks is vital to addressing this while also enabling new technologies to scale and reach their full potential.”

Participants in the sandbox include central banks and monetary authorities from Australia, Czechia, France, Germany, Singapore, Taiwan and Thailand, among others. Commercial bank and market infrastructure participants include ANZ; Citibank; CLS Group; DBS; Deutsche Bank; DTCC; HSBC; Hua Nan Commercial Bank; Intesa Sanpaolo; NatWest Group; Santander; Société Générale; Standard Chartered; Sumitomo Mitsui Banking Corporation; The Shanghai Commercial & Savings Bank, Ltd; The Standard Bank of South Africa; United Overseas Bank; and Westpac Banking Corporation.

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