BRUSSELS–(BUSINESS WIRE)–SWIFT has successfully demonstrated that central bank digital currencies (CBDCs) and tokenized assets can move seamlessly on existing financial infrastructure – a major step towards their seamless integration into the international financial ecosystem.
The results, from two separate experiments, solve the significant challenge of interoperability in cross-border transactions by bridging different Distributed Ledger Technology (DLT) networks and existing payment systems, allowing currencies and digital assets to flow smoothly and interact with their traditional counterparts. This milestone builds on SWIFT’s core capabilities and means that as CBDCs and tokens grow, they can be rapidly deployed at scale to facilitate trade and investment between more than 200 countries and territories around the world.
Interconnecting CBDCs for Seamless Cross-Border Payments
Globally, nine out of ten central banks are actively exploring digital currencies, often using different technologies and focusing primarily on domestic use. For the potential of CBDCs to be fully realized across borders, these digital currencies must overcome inherent differences to interact with each other, as well as with traditional fiat currencies.
SWIFT, in collaboration with Capgemini, carried out 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 success showed that blockchain networks could be interconnected for cross-border payments through a single gateway, and that SWIFT’s new transaction management capabilities could orchestrate all cross-network communications.
14 central and commercial banks, including Banque de France, Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo, are now collaborating in a test environment to accelerate large-scale deployment.
Unlocking the potential of tokenized assets
In a separate experiment with a different group of participants, SWIFT also demonstrated that its infrastructure can serve as an interconnection between multiple tokenization platforms and different types of cash payment.
Working with Citi, Clearstream, Northern Trust and technology partner SETL, SWIFT explored 70 scenarios simulating the market issuance and secondary market transfers of bonds, stocks and tokenized cash. It successfully served as a single access point to various tokenized networks and demonstrated that its infrastructure could be used to create, transfer and redeem tokens and update balances between multiple client wallets, as well as to provide interoperability. between different tokenization platforms and existing account-based infrastructure.
Tokenization is a relatively nascent market, but the World Economic Forum has estimated it could reach $24 billion by 20271. Potential benefits include greater market liquidity and fractionation, which could increase access to investment markets for retail investors and allow institutional investors to build stronger portfolios.
Tom Zschach, Chief Innovation Officer at SWIFT, said: “Digital currencies and tokens have enormous potential to shape the way we all pay and invest in the future. But this potential can only be unleashed if the different approaches explored have the ability to connect and work together. We see inclusiveness and interoperability as central pillars of the financial ecosystem, and our innovation is a major step towards unlocking the potential of the digital future. For CBDCs, our solution will allow central banks to simply and directly connect their own networks to all other payment systems around the world through a single gateway, ensuring an instant and smooth flow of cross-border payments.
“Tokenization has great potential when it comes to enhancing liquidity in markets and increasing access to investment opportunities, and SWIFT’s existing infrastructure can ensure that these benefits can be realized sooner. possible, by as many people as possible.
The experiments are part of SWIFT’s broad innovation agenda in support of its strategic direction to enable instant, seamless and interoperable cross-border transactions. The cooperative, which connects more than 11,500 financial institutions and 4 billion accounts in 200 countries and territories, was created to connect geographies, technologies and currencies. And it has transformed the underlying infrastructure of the global economy at a rapid pace to meet the rapidly changing needs of businesses and consumers. This includes a new standard, SWIFT Go, for low-value payments, and services such as payment pre-validation which uses predictive intelligence to pre-check international payments before they begin to avoid common mistakes that cause delays.
Full details of the experiments and the results can be found here:
Connecting digital islands: CBDCs
Connecting Digital Islands: Tokenized Assets
SWIFT is a global, member-owned cooperative and the world’s leading provider of secure financial messaging services. We provide our community with a messaging platform and communication standards, and we offer products and services to facilitate access and onboarding, identification, analysis, and regulatory compliance.
Our messaging platform, products and services connect more than 11,500 banking and exchange organizations, market infrastructures and corporate clients in more than 200 countries and territories. Although SWIFT does not hold funds or manage accounts on behalf of clients, we enable our global community of users to communicate securely, exchanging standardized financial messages in a reliable manner, thereby supporting global and local financial flows, as well as trade and commerce around the world. the world.
As a trusted supplier, we relentlessly pursue operational excellence; we support our community in the fight against cyber threats; and we are continually looking for ways to cut costs, reduce risk and eliminate operational inefficiencies. Our products and services support our community access and integration, business intelligence, reference data, and financial crime compliance needs. SWIFT also brings together the financial community – globally, regionally and locally – to shape market practices, set standards and debate issues of mutual interest or concern.
Based in Belgium, SWIFT’s international governance and oversight reinforce the neutral and global character of its cooperative structure. SWIFT’s global network of offices ensures an active presence in all major financial centers.
1 HSBC, The 10x potential of tokenization – Democratizing investment opportunities, https://www.gbm.hsbc.com/-/media/gbm/insights/attachments/potential-of-tokenization.pdf