SWIFT Is Building Interoperability For CBDC Cross Border Payments
SWIFT is working on to link various central bank digital currency systems to make cross-border transactions easier, as most of the CBDCs are focused on resolving domestic uses.
The largest financial messaging services, SWIFT, is working on the test an interlink between several national CBDC networks to enable cross-border transactions. The Belgium-based company is working together with the French information technology services and consulting company Capgemini on the new project.
SWIFT wrote on their blog that the cross-border use of CBDCs may have been a blind spot for this type of digital currency, as the purpose of a CBDC is mainly for domestic use.
According to Thomas Zschach, Chief Innovation Officer at SWIFT, various CBDC systems should work together for “frictionless” cross-border transactions.
“Facilitating interoperability and interlinking between different CBDCs being developed around the world will be critical if we are to fully realise their potential. Today, the global CBDC ecosystem risks becoming fragmented with numerous central banks developing their own digital currencies based on different technologies, standards and protocols.”
Nick Kerigan, Head of Innovation at SWIFT, added that as CBDCs will be viewed as “a new form of fiat currencies.” This means that there will be platforms paralleling the traditional payment system, which will need to integrate with the traditional financial infrastructure.
SWIFT, which is currently serves over 11,000 financial institutions in over 200 countries, aims to enable a highly scalable and easily integrated solution for CBDCs to be used for international payments.
According to the blog post explained that the deployment of a gateway on a domestic central bank digital currency network is the key feature of this experiment:
“The gateway will intercept cross-border transactions on the network, translate them, and send them to the SWIFT platform for onward transmission to another CBDC network or established payment system.”
Working together with Capgemini, SWIFT will be focused on addressing three use cases – CBDC to CBDC, fiat to CBDC, and CBDC to fiat. They have also looked beyond CBDCs, attempting to enable interoperability between other digital assets and currencies.
SWIFT Sanctions Against Russia
After the West agreed to block Russian banks from the SWIFT network, which essentially means excluding them from the largest global financial network, the Russian financial institutions have had troubles surviving.
The move to remove Russia from SWIFT was intended to cut out the country’s ability to liquidate assets and transfer funds across institutions that are members of the system. Countries such Russia and China, have criticized the move, and are now planning to integrate their own messaging systems with other countries to be able to make international transactions.
