The firm said it is advancing to the second phase because of the satisfactory results it got from the first phase of trials.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has announced the advancement of its Central Bank Digital Currency (CBDC) and is set to move on to a second phase of testing to assess applications like trade finance and securities settlement according to a Coindesk report based on the firm’s announcement.
SWIFT occupies a very pivoting position in the world’s financial ecosystem as a primary avenue by which different banks from various countries communicate. In a bid to maintain its relevance and align with the current evolution in the financial ecosystem, SWIFT is now conducting tests on how CBDCs can interoperate.
The firm said it is advancing to the second phase because of the satisfactory results it got from the first phase of trials. The first trial which featured about 18 entities entails testing whether CBDCs can move between Distributed Ledger Technologies (DLT) and the infrastructure underpinning the traditional financial system.
Per the results shared, the CBDC worked as expected and stakeholders are now calling for enhanced developments across the board.
“Our experiments have shown the critical role that Swift can play in a financial ecosystem in which digital and traditional currencies co-exist,” says Tom Zschach, Chief Innovation Officer at Swift, adding that the “solution has been successfully tested across almost 5,000 transactions between two different blockchain networks and a 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.”
Should SWIFT record the breakthrough it needed with respect to the interoperability features of CBDC, maintaining its role in a CBDC-laden world will become quite easy in the near future.
SWIFT CBDC Testing, Next Steps
As the firm announced, the next steps now involve testing cross-border payments as it relates to trade finance and securities settlement.
“Interoperability is key to realising the potential of CBDCs to deliver real-time cross-border payments,” said Lewis Sun, Global Head of Domestic and Emerging Payments, Global Payments Solutions at HSBC, one of the participants in the trials, adding, “While interest in CBDCs is growing, so is the risk of fragmentation as a widening range of technologies and standards is being experimented with. Our continuing collaboration with Swift, central banks and other commercial banks provides an invaluable platform to innovate solutions that can bring about faster, cheaper, and more secure cross-border payments.”
Today, just a handful of nations including The Bahamas and Nigeria have a fully functional CBDC in circulation. While the emphasis on adoption is a different subject, more nations including the United States, the United Kingdom, and China amongst others are advancing research and testing with respect to their own version of CBDC.
For now, no major economy has a CBDC and there has been a calling for unity in design, a call that is being answered by SWIFT.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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