A recent partnership marks a significant advancement in the field of CBDCs as Swift, the global financial messaging network, has joined hands with three central banks, including the Hong Kong Monetary Authority and the Central Bank of Kazakhstan. The objective is to beta test Swift’s CBDC connector solution for better cross-border transactions.
The uniquely fascinating part of this collaborative initiative is the focus on interoperability, as stated by Tom Zschach, Swift’s Chief Innovation Officer. Their aim is to ensure efficient coexistence of different digital currencies along with our current fiat-based currencies and payment systems. Undeniably, Swift’s CBDC innovations are being hailed for preventing digital islands while establishing safe links between current and future payment systems.
Swift asserts that the initially conducted testing phase comprised 18 international financial institutions, with a staggering 4,736 transactions successfully processed among the Quorum and Corda blockchain networks.
With its past successes propelling it forward, Swift is now embarking on the second phase of CBDC sandbox experiments, involving more than 30 institutions like the Reserve Bank of Australia, Deutsche Bundesbank, and the Bank of Thailand. Aspects like trigger-based payments for digital trade platforms, forex models, and liquidity saving mechanisms will undergo exploration.
However, a looming challenge for Swift in its reign over the digital payments landscape could come from the impending BIS’s Unified Ledger global CBDC system. The proposition of tokenizing international central bank and commercial money, along with various other assets on a single platform can potentially revolutionise transactions.
A staggering 130 countries, or 98% of global GDP, are dabbling with the concept of CBDC, as per data from the Atlantic Council CBDC tracker. It also indicated that 11 countries, including China, The Bahamas, and Jamaica, have fully rolled out a CBDC. On the other hand, the US, despite having no fixed plans for a digital currency launch, is steadily progressing with its wholesale CBDC.
All these dynamics depict the changing landscape as the digital waves are disrupting traditional norms, digitizing not only transnational banking but also money itself. While interest, adoption, and intensifying competition promise progress, only time will reveal the possible risks and rewards of such a transformation.
Source: Cryptonews
