SWIFT claims CBDC’s have reached “major milestone” in cross-border transactions

“Central Bank Digital Currencies (CBDCs) can move seamlessly on existing financial infrastructure”, according to research carried out by financial messaging service SWIFT

The findings confirm that CBDCs and other tokenised assets can seamlessly be bridged with different networks and existing payment systems, something which many countries struggled working with due to limited blockchain infrastructure. 

SWIFT has identified that CBDCs can be rapidly deployed at scale to facilitate trade and investment between more than 200 countries and territories around the world, labelled a “major milestone” by the messaging firm. 

“Digital currencies and tokens have huge potential to shape the way we will all pay and invest in the future,” said Tom Zschach, Chief Innovation Officer at SWIFT. 

“We see inclusivity and interoperability as central pillars of the financial ecosystem, and our innovation is a major step towards unlocking the potential of the digital future. 

“Our solution will enable central banks to connect their own networks simply and directly to all the other payment systems in the world through a single gateway, ensuring the instant and smooth flow of cross-border payments.”

As CBDCs and other tokenised assets continue to develop and evolve and for their potential to be realised across borders, they need to overcome similar differences to interact with one another, as well as boundaries fiat currencies possess. 

SWIFT helped achieve CBDC-to-CBDC transactions between networks through Quorum and Corda technologies, as well as fiat-to-CBDC and real-time gross settlement systems. 

The success of this integration SWIFT claims has shown that blockchain networks could be interlinked for cross-border payments through a single gateway, and that its new transaction management capabilities could facilitate all inter-network communications. 

Andrew Edem, Head of Innovation at fintech firm PPRO, believes the potential of CBDC cross-border transactions would be a “huge improvement over the existing correspondent banking system”. 

He added: “To become really utilitarian for payments, crypto will need to interoperate with the existing financial system infrastructure, which is why it’s encouraging that SWIFT was able to show progress here.

“It’s worth noting that in its tests, SWIFT has not actually transferred value using real-world CDBCs, but instead has tested technology that has been proposed for CDBCs – which is not yet formally adopted to our knowledge.

“It’s also important to understand that in this context, we are referring to “wholesale” CDBCs, which would be only transferred between credit institutions, rather than retail CDBCs, which would be held by consumers in wallets.”