Mark Jones
LONDON (Reuters) – Global banking messaging network SWIFT plans to create a new platform in the next one to two years to connect the wave of central bank digital currencies currently in development with the existing financial system, Reuters reported.
The move, which will be one of the most significant for the nascent CBDC ecosystem given SWIFT’s key role in global banking, is likely to be tailored in time for the first major banks to launch.
About 90% of the world’s central banks are now exploring digital versions of their currencies. Most of them do not want to lag behind Bitcoin and other cryptocurrencies, but face technological difficulties.
SWIFT head of innovation Nick Kerigan said its latest trial, which took 6 months and involved a group of 38 members of central banks, commercial banks and settlement platforms, was one of the largest global collaborations on CBDC and “tokenized” assets for date of.
It was focused on ensuring that CBDCs across countries could be shared, even if they were built on different underlying technologies or “protocols,” thereby reducing the risks of payment system fragmentation.
The research also found that they could be used in highly complex trade or foreign exchange payments and could potentially be automated to speed up and reduce the cost of processes.
Kerigan said the results, which also proved banks could leverage existing infrastructure, were widely hailed by participants as a success and gave SWIFT a work schedule.
“We’re looking at a roadmap for production (product launch) in the next 12 to 24 months,” Kerigan said in an interview. “It’s moving from the experimental stage to something that becomes reality.”
While the timeline could still change if the launch of a CBDC in a major economy is delayed, exiting the blocks when they do would be a major incentive to maintain SWIFT’s current dominance in the interbank water supply network.
Countries such as the Bahamas, Nigeria and Jamaica already have CBDCs in operation. China is well advanced in real-world testing of the electronic yuan. The European Central Bank is also developing a digital euro, and the Bank for International Settlements, a global group of central banks, is conducting numerous cross-border trials.
However, SWIFT’s main advantage is that its existing network is already available in more than 200 countries and includes more than 11,500 banks and funds that use it to send trillions of dollars every day.
SCALABLE OPTION
The firm went from being virtually unknown outside banking circles to becoming a household name in 2022, when it cut off most Russian banks from its network as part of Western sanctions over its incursion into Ukraine.
Kerigan said a similar move could still happen in the new CBDC system, but doubted it would stop countries from joining it.
The latest trial involved the central banks of Germany, France, Australia, Singapore, the Czech Republic and Thailand, as well as a number of banks that wished to remain anonymous.
The event was also attended by a host of major commercial banks, including HSBC, Citibank, Deutsche Bank, Societe Generale (OTC:), Standard Chartered (OTC:) and settlement platform CLS FX, as well as at least two banks from China.
The idea is that once Interlink’s solution scales, banks will have one main global connection point capable of processing digital asset payments, rather than thousands if they created a separate point for each counterparty.
In addition to the push toward CBDC, Kerigan pointed to a Boston Consulting Group (BCG) forecast that by 2030, about $16 trillion in assets could be “tokenized”—a process in which assets such as stocks and bonds are converted into digital chips , which can be converted into digital chips. then released and traded in real time.
“If we can connect any number of networks (to the SWIFT system), it becomes a much more scalable option for the industry,” he said.