SWIFT will continue testing the CBDC project
In order to connect the digital currencies of various nations, the banking network is attempting to create a system.
SWIFT's initiative to link central bank digital currencies (CBDC) has "clear potential and value," the interbank messaging corporation stated on March 9, 2023.
The project, which involved banks like BNP Paribas in France, Intesa Sanpaolo in Italy, and Standard Chartered (STAN) in the United Kingdom, as well as the central banks in France and Singapore, will now proceed to a second phase of testing to evaluate applications like trade finance and securities settlement.
“While interest in CBDCs is growing, so is the risk of fragmentation as a widening range of technologies and standards is being experimented with,” Lewis Sun, global head of domestic and emerging payments at HSBC, said in a statement, adding that the SWIFT project could lead to "faster, cheaper and more secure cross-border payments.”
While nations like the U.K. and the European Union are considering it, nations like the Bahamas and Nigeria have already released digital versions of their national currencies. As authorities attempt to reduce the time and expense of processing cross-border payments, organizations like the International Monetary Fund and the Bank for International Settlements have called on central banks to collaborate.
Tom Zschach, chief innovation officer at Swift, comments:
“Our experiments have shown the critical role that Swift can play in a financial ecosystem in which digital and traditional currencies co-exist. Our API-based CBDC connector has been proven to be robust across almost 5,000 transactions between two different blockchain networks and traditional fiat currency, and we’re delighted to have the support of our community in developing it further. Many participants have made clear their desire for continued collaboration on interoperability, and this is particularly pleasing.”
According to him, SWIFT plans to create a beta version of the payment system that central banks may test out further. Also, a second round of sandbox testing will also be conducted, allowing the Swift member institutions to work together even more closely while concentrating on brand-new use cases such as conditional payments, trade finance, and securities settlement.
Intesa Sanpaolo's executive director, Stefano Favale, says:
“When it comes to CBDCs, interoperability becomes a key enabler to avoiding liquidity traps and creating a network effect. We truly believe that Swift, through its experience and capabilities, is the natural market-neutral candidate to support future digital asset developments.”
This initiative in the CBDC space will support improvised crypto regulation as well.
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