The SWIFT interbank payments protocol has announced a new round of testing cross-border payments using central bank digital currencies.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has announced that it is working with Capgemini, a major management and information technology consulting firm, on new experiments with central bank digital currencies (CBDC).
Due to widespread interest around the world in creating digital currencies, SWIFT experiments will be aimed at testing the compatibility of CBDCs of different countries for their future use in cross-border payments. Recall, a recent study showed that 90% of all central banks are examining CBDCs.
SWIFT Chief Innovation Officer Tom Zschach emphasizes that central banks use different protocols, technologies and standards to develop their digital currencies. That is why interoperability and interconnectivity between the various national CBDCs are a priority of the current experiment. Such an approach, according to Zschach, will avoid the future fragmentation of the global financial market.
The Head of Innovation Execution Nick Kerigan believes that the possible fragmentation may lead to the emergence of “digital islands,” which will further hinder the implementation of cross-border payments using CBDCs. Therefore, the main objective of SWIFT experiments will be to ensure that various financial systems and different CBDCs work together to enable their effective use in international payments in the future.
Kerigan argues that if SWIFT and Capgemini’s joint efforts are successful, the international payment system will once again demonstrate the technical capabilities to connect different payment networks and will be able to help central banks create national CBDCs ready for cross-border payments.
Last year SWIFT analysts conducted a study together with the consulting company Accenture to explore the practical aspects of using central bank digital currencies for international payments. In the report, SWIFT analysts assured that the company would be able to support the financial community as new digital solutions are developed. In the current study, however, SWIFT experts are ready to go beyond CBDCs and test their network’s compatibility with other digital currencies, including destabilized stablecoins.
