SWIFT Experiments with CBDC Interoperability to Facilitate Cross-Border Payments


SWIFT, a global provider of secure financial messaging services, is testing to interconnect several nationally based emerging CBDC networks for cross-border transactions. A Belgian-based network that enables financial institutions to communicate with each other for global payments has chosen French information technology services and consulting firm Capgemini for its relocation.

Interoperability of CBDCs

According to the official blog post SWIFT decided Cross-border use of CBDCs may be a blind spot for a type of digital currency developed primarily for the implementation of domestic policies. Thomas Zschach, Chief Innovation Officer at SWIFT, believes that different CBDC systems must work together for “friction-free” cross-border transactions and that SWIFT plays a role.

“Facilitating and interconnecting interoperability between different CBDCs in development around the world is critical to realizing their full potential. Today, the global CBDC ecosystem is at risk of fragmentation due to numerous central banks developing their own digital currencies based on different technologies, standards and protocols.”

Nick Kerigan, head of innovation at SWIFT, said CBDCs will increasingly be seen as a “new form of fiat currency” and that multiple platforms that run alongside existing payment systems will be developed to integrate with existing financial infrastructure.

In this case, with access to technology solutions from more than 11,000 financial institutions in more than 200 countries, SWIFT aims to potentially implement a “scalable and easily integrated solution” for international payments via CBDC.

The post also described the deployment of gateways to domestic central bank digital currency networks as a key feature of this experiment.

“The gateway will intercept cross-border transactions on the network, translate them, and then send them to the SWIFT platform to continue sending them to other CBDC networks or existing payment systems.”

This post revealed that in collaboration with Capgemini, SWIFT will focus on solving three use cases: CBDC to CBDC, fiat to CBDC, and CBDC to fiat. The giant has also attempted to go beyond CBDCs and enable interoperability between other digital assets and currencies.

Attention amid sanctions against Russia

Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the world’s largest international financial messaging system. After the West agreed to exclude Russian banks, the region’s financial institutions struggled to survive.

The expulsion of Russia from SWIFT was intended to block the state’s ability to liquidate assets and transfer funds between institutions that were members of the system. However, the move has been criticized by countries such as Russia and China, which plan to migrate to their own messaging systems to counter the effects of sanctions to isolate and punish the country.

Main image courtesy of Caspian News

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