SWIFT Expands CBDC Initiatives: Central Banks Dive Into Testing Phase

CryptoMode SWIFT CBDC Central Banks

Digital currency, a pivotal frontier in modern banking, has recently seen significant advancements. As per their recent announcement, SWIFT, the bank messaging behemoth, has taken a notable step in its digital currency journey.

Participation and Collaboration: Central Banks Onboard

On September 13th, SWIFT revealed that three prominent central banks had embarked on the beta testing phase of their Central Bank Digital Currency (CBDC) interoperability initiative. Specifically, the Hong Kong Monetary Authority and the Central Bank of Kazakhstan have paired their systems with SWIFT’s groundbreaking “CBDC connector solution”. A third central bank, yet to be identified, has also joined this venture.

SWIFT commenced the first sandbox testing phase in March, attracting an impressive roster of more than 18 participants. Noteworthy names include the Royal Bank of Canada, Banque de France, Société Générale, BNP Paribas, Monetary Authority of Singapore, HSBC, Deutsche Bundesbank, and NatWest. The initial tests observed over 5,000 transactions in 12 weeks. This number is set to soar, as the participant count is anticipated to exceed 30 shortly.

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SWIFT’s endeavors don’t stop here. In collaboration with the New York Federal Reserve Bank, they have pioneered a wholesale CBDC initiative, leveraging a regulated liability network. This move showcases SWIFT’s commitment to keeping pace with the rapidly evolving banking landscape.

SWIFT’s Position: A Delicate Balance

Linking more than 11,500 financial entities globally, SWIFT’s stance on CBDCs has been debated. There’s an inherent tension since the novel CBDC technology could rival SWIFT’s offerings. For instance, the Bank for International Settlements backs various CBDC bridging projects, highlighting this competitive aspect. However, as often seen in business, competition catalyzes innovation.

In a noteworthy declaration last August, SWIFT stated that 89% of its transactions were executed within an hour. This feat surpasses the G20’s benchmark of achieving 75% of settlements within an hour by 2027. Furthermore, a significant 84% of operations on the network undergo directly or via a singular intermediary.

Yet, SWIFT acknowledges the hurdles; only 60% of wholesale payments meet the one-hour criterion. That is largely due to regulatory oversight, operational hours, and batch processing nuances.

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