CBDC | Standard Bank of South Africa Among 38 Global Entities Selected by SWIFT to Trial a Solution Connecting CBDCs

SWIFT, the global bank messaging network, plans to develop a new platform to connect central bank digital currencies (CBDCs) within the next one to two years.

According to Reuters, the launch of the new platform is planned to coincide with the launch of the first major CBDCs. Given SWIFT’s pivotal role in global banking, this initiative is likely to be fine-tuned and synchronized with the rollout of prominent CBDCs.

Approximately 90% of the world’s central banks are currently exploring digital iterations of their currencies with over 40% looking to implement CBDCs by 2028. While many seek to avoid falling behind in the wake of bitcoin and other cryptocurrencies, they are contending with significant technological intricacies in the process.

The Head of Innovation at SWIFT, Nick Kerigan, stated that their most recent trial, spanning six months and engaging a consortium of 38 central banks, commercial banks, and settlement platforms, represented one of the most extensive global collaborations on CBDCs and ‘tokenized’ assets to date.

Among participants in Africa is the Standard Bank of South Africa.

The trial emphasized ensuring interoperability among various countries’ CBDCs, even if they are built on different underlying technologies or ‘protocols.’ This focus aims to mitigate the risks of fragmentation in payment systems.

Additionally, the trial demonstrated that CBDCs could be utilized in intricate trade or foreign exchange transactions, potentially leading to automation that accelerates processes and reduces costs. Kerigan noted that the results, which also indicated that banks could leverage their existing infrastructure, were widely regarded as successful by participants, providing SWIFT with a clear timeline for further development.

According to SWIFT, four different use cases were explored:

• Digital Trade
• Foreign Exchange (FX)
• Trade & Settlement
• Delivery-versus Payment (DvP)
• Liquidity Saving

 Summary of the Swift connector capabilities per use caseAs reported by BitKE in 2023, SWIFT said it was exploring the feasibility and functionality of enabling the transfer of tokenized assets across different blockchain networks.

According to the CIO at SWIFT, Tom Zschach, such a system would be key for financial institutions that want to leverage their existing infrastructure to connect to blockchain ledgers.

“In such a highly fragmented ecosystem, it would simply not be feasible for financial institutions to connect to each and every platform individually,” said Tom Zschach, CIO at SWIFT.

“Overcoming this fragmentation will be key to the long-term scalability of the market.”

Follow us on Twitter for latest posts and updates