The firm said that it is advancing to the second phase due to the satisfactory results it obtained from the first phase of the tests.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has Announced the advancement of its central bank digital currency (CBDC) and is ready to move into a second phase of testing to evaluate applications such as trade finance and securities settlement according to Coindesk report based on the firm’s announcement.
SWIFT occupies a very important position in the global financial ecosystem as the main channel through which different banks from various countries communicate. In an attempt to stay relevant and align with the current evolution of the financial ecosystem, SWIFT is now testing how CBDCs can interoperate.
The firm said that it is advancing to the second phase due to the satisfactory results it obtained from the first phase of the tests. The first test involving around 18 entities involves testing whether CBDCs can move between Distributed Ledger Technologies (DLT) and the infrastructure that underpins the traditional financial system.
Based on the shared results, the CBDC performed as expected and stakeholders are now calling for improved developments across the board.
“Our experiments have shown the critical role that Swift can play in a financial ecosystem where digital and traditional currencies coexist,” says Tom Zschach, Swift’s chief innovation officer, adding that “the solution has been successfully tested in almost 5000 transactions”. between two different blockchain networks and a traditional fiat currency, and we are delighted to have the support of our community to further develop it. Many participants have made clear their desire for continued collaboration on interoperability, and this is particularly welcome.”
If SWIFT registers the breakthrough it needed regarding CBDC interoperability features, maintaining its role in a CBDC-heavy world will be quite easy in the near future.
SWIFT CBDC trials, 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 harnessing the potential of CBDCs to deliver real-time cross-border payments,” said Lewis Sun, global head of domestic and emerging payments, global payment solutions at HSBC, one of the trial participants, adding : “While interest in CBDCs is growing, so is the risk of fragmentation as an ever-widening range of technologies and standards are experimented with. Our ongoing collaboration with Swift, central banks and other commercial banks provides an invaluable platform to innovate solutions that can deliver faster, cheaper and more secure cross-border payments.”
Today, only a handful of nations, including the Bahamas and Nigeria, have a fully functional CBDC in circulation. While the emphasis on adoption is a different matter, more nations, including the US, UK, and China, among others, are advancing research and testing regarding their own version of CBDC.
For now, no major economy has a CBDC and there has been a call for unity in design, a call that is being answered by SWIFT.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
