Swift has announced that it has made further progress on its experimental solution for interlinking Central Bank Digital Currencies (CBDCs), reporting that 18 central and commercial banks found “clear potential and value” in the API-based CBDC connector after a comprehensive review.
The cooperative published the findings of the 12-week period of collaborative sandbox testing, in which almost 5,000 transactions were simulated between two different blockchain networks and with existing fiat-based payment systems. Central and commercial bank participants expressed strong support for the solution’s continued development, noting that it enabled a seamless exchange of CBDCs, even those built on different platforms.
Interoperability is a key strategic focus for Swift, and a key challenge for the financial industry as digital currencies develop. According to the Atlantic Council, more than 110 countries are currently exploring CBDCs, with almost a quarter expecting to launch within the next one or two years. However, most are focusing primarily on domestic usage, which could lead to a fragmented landscape consisting of ‘digital islands’.
Swift announced in October that it had developed a solution to enable CBDCs to move between DLT-based and fiat-based systems using existing financial infrastructure. The sandbox testing was set up so that central and commercial banks could experiment with the solution to validate its effectiveness and share insight to guide its development.
Tom Zschach, Chief Innovation Officer at Swift, said: “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.”
Bruno Mellado, Global Head of Payments and Receivables at BNP Paribas, said: “As new clearing alternatives arise with CDBCs, it is important that we as a community leverage the safe and transparent utilities and standards built together with Swift. This paper shows the path to an industrial approach to access new and innovative ways to transact between parties.”