SWIFT, a global provider of secure financial messaging services, is testing the integration of multiple home-based emerging CBDC networks for cross-border transactions. The Belgium-based network, which enables financial institutions to communicate with each other for global payments, has used French information technology services and consulting company Capgemini for the move.
Interoperability of CBDCs
According to the official blog post, SWIFT said that cross-border use of CBDCs could be a blind spot for this type of digital currency as it was developed primarily to enforce domestic policies. Thomas Zschach, Chief Innovation Officer at SWIFT, believes that the various systems of CBDCs need to work together for “frictionless” cross-border transactions, and SWIFT has a role in this.
“Facility of interoperability and interlinking between the various CBDCs being developed around the world will be critical if we are to fully realize their potential. Today, the global CBDC ecosystem is at risk of fragmentation as many Central banks are developing their own digital currency based on different technologies, standards and protocols.”
Nick Kerrigan, SWIFT’s head of innovation, said that CBDCs will increasingly be regarded as “a new form of fiat currencies”, with many such platforms being developed in parallel with traditional payment systems to integrate with traditional financial infrastructure.
In this case, SWIFT, whose technology solutions can be accessed by more than 11,000 financial institutions in more than 200 countries, aims to enable “a highly scalable and easily integrated solution” for international payments via CBDCs. Is.
The post also highlighted the deployment of the gateway on the domestic central bank digital currency network as a key feature of this experiment:
“The gateway will intercept cross-border transactions on the network, translate them, and send them to the SWIFT platform for onward transmission to other CBDC networks or established payment systems.”
In collaboration with Capgemini, the post revealed that SWIFT will be focused on addressing three use cases – CBDC to CBDC, fiat to CBDC, and CBDC to fiat. The giant has also looked beyond CBDCs, striving to enable interoperability between other digital assets and currencies.
In the headlines amid sanctions against Russia
SWIFT – The Society for Worldwide Interbank Financial Telecommunication – is the world’s largest international financial messaging system. Financial institutions in the region have had trouble staying afloat, after the West agreed to exclude Russian banks.
The purpose of pulling Russia out of SWIFT was to liquidate the country’s assets and reduce its ability to transfer funds to the system’s member institutions. However, for isolating and punishing the nation, the move drew criticism from countries such as Russia and China – which planned to shift to their own messaging systems to counter the impact of the sanctions.
Featured image courtesy of Caspian News
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