The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, the organization that maintains the network over which most interbank transfers occur, said that its existing infrastructure can also be used to move digital tokens, such as a central bank digital currency.
SWIFT noted that many central banks are currently experimenting with digital currencies but often use different technologies to do so. This represents a major hurdle to worldwide use of CBDCs, as this would mean they can't interact in the way tradition fiat currencies do. This was why the organization conducted a pair of experiments to see if it could achieve interoperability between different tokens.
The first experiment, conducted in collaboration with a French technology consulting company Capgemini, was able to successfully enact CBDC-to-CBDC transactions between different distributed ledger networks based on the popular Quorum and Corda technologies, as well as fiat-to-CBDC flows between these networks and a real-time gross settlement system. The results demonstrate that blockchain networks could be interlinked for cross-border payments through a single gateway, and that SWIFT's new transaction management capabilities could orchestrate all inter-network communication.
SWIFT added that 14 central and commercial banks, including the Banque de France, the Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo, are now collaborating in a testing environment to accelerate the path to full scale deployment.
The second experiment — done in collaboration with Citi, Clearstream, Northern Trust, and SETL — involved exploring 70 scenarios simulating market issuance and secondary market transfers of tokenized bonds, equities and cash. SWIFT found it was able to successfully serve as a single access point to various tokenized networks and showed its infrastructure could be used to create, transfer and redeem tokens and update balances between multiple client wallets, as well as provide interoperability between different tokenization platforms and existing account-based infrastructure.
Tom Zschach, the chief innovation officer at SWIFT, said in a statement that these results show the viability of digital currencies on a national scale.
"Digital currencies and tokens have huge potential to shape the way we will all pay and invest in the future. But that potential can only be unleashed if the different approaches that are being explored have the ability to connect and work together. 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. For CBDCs, our solution will enable central banks to connect their own networks simply and directly to all the other payments systems in the world through a single gateway, ensuring the instant and smooth flow of cross-border payments," he said.
The results of the experiment come shortly after the
