SWIFT to launch new platform for central bank digital currencies

Global bank networking system SWIFT will be building a new platform for digital currencies issued by central banks, over the next two years.

The decision follows a 6-month-long trial of central bank digital currencies (CBDCs) and other tokenised assets, among a group of 38 central banks, commercial banks and settlement platforms.

Announcing the results of the second phase of industry-wide sandbox testing on CBDCs, SWIFT said its connector was found to be capable of facilitating a range of financial transactions among participating institutions.

SWIFT said CBDCs and other forms of digital tokens were easily incorporated into the system during the trials, making it a routine exercise.

Trials were carried out using different CBDCs built on different technologies, or "protocols", as also in highly complex trading situations.

Swift said its solution can simplify and speed up trade flows and make currency settlements more efficient, while allowing financial institutions to continue with their existing infrastructure.

Besides enabling cross-border transfers, Swift’s solution can connect CBDCs on different networks with each other, as well as with physical currencies. 

Swift’s solution facilitates automatic trade payments along with asset transfers simultaneously. It can also be programmed to suit smart contracts for making payments  automatic, provided certain conditions are met, thereby allowing 24/7 transactions.

Although CBDCs are still in their developing phase, central banks across the world are going ahead with tockenisation of currencies in order to curb the menace of fake currencies and to offset the effects of privately run digital currency networks.

Participants in the sandbox trials included central banks and monetary authorities from Australia, Czechia, France, Germany, Singapore, Taiwan and Thailand, among others. 

Commercial bank and market infrastructure participants included ANZ, Citibank, CLS Group, DBS, Deutsche Bank, DTCC, HSBC, Hua Nan Commercial Bank, Intesa Sanpaolo, NatWest Group, Santander, Societe Generale, Standard Chartered, Sumitomo Mitsui Banking Corporation, The Shanghai Commercial & Savings Bank Ltd, The Standard Bank of South Africa, United Overseas Bank, and Westpac Banking Corporation.

Once launched, the new platform will mark the most significant stage in the evolution of money.