SWIFT Plans To Interlink All CBDCs, Here’s Why
Even as central banks of various economies explore CBDCs, SWIFT is advancing cross-border payments involving digital currencies. While most of the central bank digital currency (CBDCs) focus on achieving digitalization of fiat currencies, SWIFT’s latest move aims at cross-border payments.
SWIFT is the global standard for payment and securities trade transactions. The new project, along with Capgemini, focuses on interlinking between various CBDCs being developed around the world.
Interlinking Major CBDCs
Thomas Zschach, chief innovation officer, SWIFT, said,
“Today, the global CBDC ecosystem risks becoming fragmented with numerous central banks developing their own digital currencies based on different technologies, standards and protocols.”
In this regard, the SWIFT payments system collaborated with Capgemini for conducting new experiments to test the interlinking of domestic CBDCs, it announced.
Sudhir Pai, chief technology and innovation officer, Capgemini, said,
“Navigating decentralisation is complex with many technology choices, operating models, and policy considerations. Our well-defined taxonomy has helped us accelerate our efforts to build CBDC interlinks with SWIFT.”
In 2021, SWIFT conducted a CBDC experiment that successfully demonstrated cross-border transactions. The transfers were held between one entity on CBDC network and an real-time gross settlement (RTGS) system.
Also, certain central banks are building CBDCs using a centralised architecture, while others are using distributed ledger technology. The experiments focus on building and demonstrating the ability to deploy a gateway on a domestic CBDC network.
The gateway will intercept cross-border transactions on the network, translate them, and send them to the SWIFT platform. Accordingly, SWIFT handles the transmission to another CBDC network or an established payment system. In collaboration with Capgemini, SWIFT is trying to address three use cases – interlinking CBDC with CBDC, fiat with CBDC, and CBDC with fiat.
Russia SWIFT Ban
The SWIFT payments network was recently in news over Russia’s removal from the system. After Russia started invading Ukraine in February, much was talked about on whether Moscow will adopt digital assets to bypass crippling economic sanctions.
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