Digital Assets: SWIFT Experiments Show CBDCs, Digital Assets Can Move Cross-Border On Existing Financial Infrastructure

October 6, 2022 | Digital Assets, FinTech, News

This means that as CBDCs and tokens develop, they can be rapidly deployed at scale to facilitate trade and investment around the world.

SWIFT conducted two separate experiments to assess interoperability in cross-border transactions between traditional payment systems, Central Bank Digital Currencies (CBDCs), and tokenized assets. SWIFT found that fiat money, CBDCs and digital assets could seamlessly be moved across the existing global financial infrastructure.

This appears to solve the “significant challenge of interoperability in cross-border transactions by bridging between different distributed ledger technology (DLT) networks and existing payment systems, allowing digital currencies and assets to flow smoothly alongside, and interact with, their traditional counterparts,” SWIFT said in a statement.

Experiment: CBDCs

In an experiment conducted with Capgemini, SWIFT achieved CBDC-to-CBDC transactions between different DLT networks based on popular Quorum and Corda technologies, as well as fiat-to-CBDC flows between these networks and a real-time gross settlement system.

The experiment showed that SWIFT could “orchestrate” CBDC transactions across blockchain networks through a single gateway.

SWIFT said 14 central and commercial banks are now collaborating on a test project that could progress to full-scale deployment.

Experiment: Tokenized assets

In the second test, SWIFT successfully applied its infrastructure as an inter-connector between various tokenisation platforms as well as different types of cash payments.

Its infrastructure could be used to create, transfer and redeem tokens and update balances between multiple client wallets, as well as provide interoperability between different tokenization platforms and existing account-based infrastructure.

Inclusivity and interoperability

“We see inclusivity and interoperability as central pillars of the financial ecosystem, and our innovation is a major step towards unlocking the potential of the digital future,” said Tom Zschach, Chief Innovation Officer at SWIFT. “For CBDCs, our solution will enable central banks to connect their own networks simply and directly to all the other payments systems in the world through a single gateway, ensuring the instant and smooth flow of cross-border payments.”

Meanwhile, the World Economic Forum has estimated tokenization could reach a market size of $24tn by 2027.

“Tokenization has great potential when it comes to strengthening liquidity in markets and increasing access to investment opportunities, and SWIFT’s existing infrastructure can ensure these benefits can be realized at the earliest opportunity, by as many people as possible,” Zschach added.

SWIFT currently connects more than 11,500 financial institutions and 4 billion accounts across 200 countries and territories.

Related Story: Finastra To Offer Banks Cross-Border Payments Via Visa Direct

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