The Society for Worldwide Interbank Financial Telecommunications (SWIFT) has initiated a beta test aimed at assessing the interoperability of central bank digital currencies (CBDCs), with participation from three central banks.
This week, SWIFT unveiled that the National Bank of Kazakhstan and the Hong Kong Monetary Authority (HKMA) are two of the participating central banks in the test. The identity of the third central bank remains undisclosed.
Earlier this year, SWIFT conducted its initial CBDC interoperability beta test, which included over a dozen participants such as BNP Paribas, HSBC, the Monetary Authority of Singapore (MAS), and Banque de France. During this phase, approximately 5,000 transactions occurred between two blockchain networks, yielding positive outcomes, as reported by SWIFT.
In this new beta test, the three central banks will integrate the solution with their respective payment infrastructure for direct testing purposes.
SWIFT’s primary objective is to prevent the emergence of isolated digital payment systems as more central banks introduce their own CBDCs, according to Chief Innovation Officer Tom Zschach. He stated, “Our focus is on interoperability – ensuring that new digital currencies can seamlessly coexist with each other and with today’s fiat-based currencies and payment systems. This next phase of testing and exploration will help us further refine the solution to ensure it is as effective as possible, and at scale.”
Furthermore, SWIFT announced the launch of the second phase of a sandbox program involving participants exploring novel use cases for CBDCs. In this sandbox, central banks, commercial banks, and payment service providers are conducting tests related to CBDC-enabled trigger-based payments for digital trading platforms, liquidity-saving mechanisms, delivery versus payment, and foreign exchange models.
Over 30 participants have joined this iteration of the sandbox, including the Reserve Bank of Australia (RBA), the Bank of Thailand, and the Deutsche Bundesbank, surpassing the 18 participants involved in the first phase.
SWIFT’s commitment to CBDC initiatives reflects its determination to stay competitive in light of the potential threat posed by CBDCs, which offer advantages such as cost-efficiency and speed in cross-border payments when compared to the traditional SWIFT system. Particularly, SWIFT faces challenges from countries like Russia and China, both of which have explored alternatives to the SWIFT platform due to its historic association with Western powers. Russia, for instance, has indicated that its digital ruble could potentially replace SWIFT in its financial markets, while China has established a prominent position with its digital yuan within the global economy.
