Swift offers a solution for using digital currencies internationally

Financial messaging system Swift says it is ready to set up a global network of central bank digital currencies (CBDCs). Following two experiments conducted on different technologies and currencies, Swift ensures on October 5, 2022 to pave the way for the global use of CBDCs and digital tokens (or “tokens”). Experiments have successfully shown that these assets can move seamlessly over existing financial infrastructure.

SWIFT connects over 11,000 banking organizations

Unlike a cryptocurrency which is traded peer-to-peer outside a state system, a central bank digital currency (CBDC) is only a virtual representation of a fiat currency managed by said central bank. . And many central banks are experimenting with CBDCs. Globally, 9 out of 10 central banks are exploring this topic of digital currencies. But different technologies are used and the use cases often remain centered on the country.

To achieve a true deployment of CBDCs one day, these digital currencies must be able to interact with each other, as well as with traditional currencies. This is where Swift comes in. The Belgian company offers a messaging platform and standards to communicate financial messages reliably. The interbank payment network, used to make bank transfers, connects more than 11,000 banking organizations and 4 billion accounts in 200 countries and territories. With these experiments, Swift claims to have taken an essential step towards the integration of CBDCs into the international financial ecosystem.

Ensure interoperability of CBDCs

Working with Capgemini, Swift has completed CBDC-to-CBDC transactions based on different technologies. Swift ensures that “blockchain networks can be interconnected for cross-border payments through a single gateway” and adds the ability to orchestrate all inter-network communications. “For CBDCs, our solution will allow central banks to simply and directly connect their own networks to all other payment systems globally through a single gateway, ensuring an instant and smooth flow of cross-border payments”summarizes Tom Zschach, Chief Innovation Officer at Swift.

14 central and private banks, including Banque de France, Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo, are now collaborating in a test environment to accelerate large-scale deployment.

The possible use of tokens

The second experiment was conducted with other participants such as Citi, Clearstream, Northern Trust and SETL. This experiment concerned the transformation of traditional assets, such as stocks or bonds, into digital tokens which are then issued and traded in real time.

Swift claims to have again demonstrated that its infrastructure can serve as an interconnection between several digital token platforms and different types of cash payment. “Digital tokens have great potential when it comes to enhancing liquidity in markets and increasing access to investment opportunities, and the existing infrastructure of Swift can ensure that these benefits can be realized as soon as possible, by as many people as possible”slips Tom Zschach.

Swift’s infrastructure can be used to create, transfer and redeem tokens, as well as update balances between different customer wallets. Interoperability between different token platforms is ensured as well as with existing banking infrastructure. Swift assures that it is ready for the arrival of these new currencies and these new forms of transaction. But these technologies still need to be deployed and used on a large scale.

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Swift offers a solution for using digital currencies internationally


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