SWIFT to Test CBDC Interoperability Via Infrastructure of Three Central Banks

The Hong Kong Monetary Authority (HKMA), the National Bank of Kazakhstan, and the central bank of another unnamed country will participate in a beta test of SWIFT’s technical solution for cross-border payments with CBDCs.

SWIFT Starts Beta Testing of “CBDC Connector”

SWIFT has started the second phase of SWIFT CBDC Sandbox Project, exploring the interoperability of different central bank digital currencies for cross-border payments. Company officials said the beta version of the “connector” will be tested through the infrastructure of three central banks.

Thus, the HKMA and the central banks of Kazakhstan and another unnamed country will integrate SWIFT’s technical solution for cross-border payments with CBDCs into their infrastructure for direct testing. 

Moreover, representatives of SWIFT reported that the group of commercial banks participating in the project has been significantly expanded. 18 international financial institutions took part in the first phase, and their number increased to 30 in the second phase. Among the newcomers are Continuous Linked Settlement Bank (CLS), Deutsche Bundesbank, Bank of Thailand, and many others. They’ll continue to simulate transactions using CBDCs in a ring-fenced environment, testing their feasibility across various blockchain networks and fiat payment systems.

The second phase will also test some additional use cases for CBDCs, including:

  • trigger-based payments for digital trade platforms;
  • foreign exchange models;
  • delivery vs. payment;
  • liquidity saving mechanisms. 

According to Tom Zschach, Chief Innovation Officer at Swift, the current phase of testing and research will help refine the developed infrastructure, making it as efficient and scalable as possible. In his opinion, despite active developments, there’s still a high probability of market fragmentation as most countries developing CBDC projects focus on their internal use. That’s why the SWIFT team gives priority to the interoperability of CBDCs and tokenized assets to minimize the risks of market fragmentation after the introduction of financial instruments.

SWIFT’s experiments with central bank digital currencies began more than 18 months ago, within which analysts achieved the interoperability of various CBDC projects.

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