The Next Phase of CBDC Interoperability: Swift Expands Testing with Three Central Banks
The Society for Worldwide Interbank Financial Telecommunication (Swift) has announced the launch of the next phase of its work on central bank digital currency (CBDC) interoperability, which includes the addition of three central banks that will be beta testing the system for interoperable CBDCs.
In a press release, Swift stated that 30 financial institutions are currently experimenting with the CBDC connector solution in a new sandbox environment to explore further use cases. The initial testing phase received positive feedback, with participants recognizing the solution’s clear potential and value.
The three central banks and monetary authorities, including the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan, have integrated the beta solution with their own infrastructure for direct testing. This marks a significant step in the development of CBDC interoperability.
In the second phase of sandbox testing, commercial banks, central banks, and financial market infrastructures will explore additional use cases, such as trigger-based payments for digital trade platforms, foreign exchange models, delivery vs. payment, and liquidity saving mechanisms. Notable participants in this phase include the Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand, and CLS.
Swift’s Chief Innovation Officer, Tom Zschach, emphasized that their focus is on ensuring interoperability between digital currencies, allowing them to coexist seamlessly with fiat-based currencies and payment systems. The goal is to prevent the creation of fragmented landscapes across borders and bridge the gap between the payment systems of today and the future.
The global interest in CBDCs is evident, with 130 countries, representing 98% of global GDP, currently exploring CBDC development to varying degrees. Among the G20 countries, 19 are in advanced stages, and nine are already in the pilot stage, including China, India, Australia, Russia, Japan, and Saudi Arabia.
To address concerns about fragmentation, Swift has prioritized developing an interoperability solution for digital currencies and tokenized assets. Their approach aims to enable seamless scalability if and when CBDCs are deployed into the financial ecosystem.
Swift began exploring CBDCs in 2020 and published a paper on how they could work for international payments. In collaboration with Accenture, they developed a prototype for a CBDC interlinking solution in 2021, allowing for the exchange of CBDCs between different central banks and payment systems. In 2022, Swift announced a solution that facilitates the movement of CBDCs between distributed ledger technology-based and fiat-based systems using existing financial infrastructure.
The first phase of sandbox testing involved simulating nearly 5,000 transactions between different blockchain networks and fiat-based payment systems. Participants highlighted that the connector enabled seamless exchange of CBDCs, even across different platforms, expressing strong support for its continued development.
