Swift says it will continue to progress on its experimental solution for interlinking Central Bank Digital Currencies (CBDCs), reporting that 18 central and commercial banks found “clear potential and value” in the API-based CBDC connector after a comprehensive review.
The cooperative published the findings of the 12-week period of collaborative sandbox testing, in which almost 5,000 transactions were simulated between two different blockchain networks and with existing fiat-based payment systems.
Central and commercial bank participants expressed strong support for the solution’s continued development, noting that it enabled seamless exchange of CBDCs, even those built on different platforms.
Interoperability is a key challenge for the financial industry as digital currencies develop.
According to the Atlantic Council, more than 110 countries are currently exploring CBDCs, with almost a quarter expecting to launch within the next one or two years.
However, most are focusing primarily on domestic usage, which could lead to a fragmented landscape consisting of ‘digital islands’.
Swift announced in October that it had developed a solution to enable CBDCs to move between DLT-based and fiat-based systems using existing financial infrastructure.
The sandbox testing was set up so that central and commercial banks could experiment with the solution to validate its effectiveness and share insight to guide its development.
“Our experiments have shown the critical role that Swift can play in a financial ecosystem in which digital and traditional currencies co-exist,” says Tom Zschach, Chief Innovation Officer at Swift.
“Our API-based CBDC connector has been proven to be robust across almost 5,000 transactions between two different blockchain networks and traditional fiat currency, many participants have made clear their desire for continued collaboration on interoperability.”
Over the coming months Swift will develop a beta version of the solution for payments that can be tested further by central banks.
A second phase of sandbox testing will also be held, in which the Swift community can collaborate further with a focus on new use cases, including in securities settlement (such as cross-asset exchange), trade finance, and conditional payments.
Sandbox participants included the Banque de France, the Deutsche Bundesbank, the Monetary Authority of Singapore, BNP Paribas, HSBC, Intesa Sanpaolo, NatWest, Royal Bank of Canada, SMBC, Société Générale, Standard Chartered and UBS.
An additional four central banks were observers, providing input and feedback without participating in the sandbox. Participants processed a total of 4,736 transactions between the Quorum and Corda blockchain networks, and between Corda and a fiat currency.
DC and CBDC / fiat currency interconnection solutions could be and the challenges they bring, while taking advantage of both the existing Swift infrastructure well known for its security and its robustness and the opportunities Swift’s enhanced platform can provide.”
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