SWIFT has completed a test which shows that Central Bank Digital Currencies (CBDCs) and tokenised assets can move seamlessly through existing financial infrastructure.
SWIFT said this marks a “major milestone” for the industry toward “enabling CBDCs and tokenised assets’ smooth integration into the international financial ecosystem”.
In the first of two experiments, SWIFT, in collaboration with Capgemini, achieved CBDC-to-CBDC transactions between different DLT networks, based on Quorum and Corda technologies.
In the same test, SWIFT achieved fiat-to-CBDC flows between these networks and a real-time gross settlement system.
The initiative showed that the blockchain networks could be interlinked for cross-border payments through a single gateway, and that SWIFT’s new transaction management capabilities could orchestrate all inter-network communication.
In a second test, working in collaboration with Citi, Clearstream, Northern Trust, and SETL,
SWIFT explored 70 scenarios simulating market issuance and secondary market transfers of tokenised bonds, equities and cash.
SWIFT served as a single access point to various tokenised networks and showed its infrastructure could be used to create, transfer and redeem tokens and update balances between multiple client wallets, as well as provide interoperability between different tokenisation platforms and existing account-based infrastructure.
Through both initiatives, SWIFT solved the significant challenge of interoperability in cross-border transactions, by bridging the gaps between different distributed ledger technology networks and existing payment systems, allowing digital currencies and assets to flow smoothly alongside, and interact with, their traditional counterparts.
14 central and commercial banks, including HSBC, Standard Chartered and UBS, are now collaborating with SWIFT in a testing environment to accelerate the path to full-scale deployment.
Tom Zschach, chief innovation officer at SWIFT, says: “Digital currencies and tokens have huge potential to shape the way we will all pay and invest in the future. But that potential can only be unleashed if the different approaches that are being explored have the ability to connect and work together. We see inclusivity and interoperability as central pillars of the financial ecosystem, and our innovation is a major step towards unlocking the potential of the digital future.
“For CBDCs, our solution will enable central banks to connect their own networks simply and directly to all the other payments systems in the world through a single gateway, ensuring the instant and smooth flow of cross-border payments.
Zschach concludes: “Tokenisation has great potential when it comes to strengthening liquidity in markets and increasing access to investment opportunities, and SWIFT’s existing infrastructure can ensure these benefits can be realised at the earliest opportunity, by as many people as possible.”
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