Financial messaging system SWIFT claims to have ‘solved’ the challenge of interoperability in cross-border transactions in a “major step towards unlocking the potential of the digital future”.
SWIFT says its experiments have showed that central bank digital currencies (CBDCs) and tokenised assets can move seamlessly on existing financial infrastructures.
In collaboration with Capgemini, SWIFT achieved CBDC-to-CBDC transactions between different distributed ledger technology (DLT) networks based on Quorum and Corda technologies, as well as fiat-to-CBDC flows between these networks and a real-time gross settlement system.
According to SWIFT, this means that as CBDCs and tokens develop, they can be rapidly deployed at scale to facilitate trade and investment between more than 200 countries and territories around the world.
While in a separate experiment with Citi, Clearstream, Northern Trust and SETL, SWIFT demonstrated that its infrastructure can serve as an interconnector between multiple tokenisation platforms and different types of cash payment. SWIFT explored 70 scenarios simulating market issuance and secondary market transfers of tokenised bonds, equities and cash.
Tom Zschach, chief innovation officer at SWIFT, said: “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.
“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.”
SWIFT, which connects more than 11,500 financial institutions and four billion accounts across 200 countries and territories, says the experiments are part of its extensive innovation agenda to enable instant, frictionless and interoperable cross-border transactions.
For Andrew Edem, head of innovation at fintech unicorn PPRO, while the potential to streamline cross-border transfers with instant value transfer between institutions would potentially be a huge improvement over the existing correspondent banking system, to become really utilitarian for payments, crypto will need to interoperate with the existing financial system infrastructure.
Edem says: “It’s worth noting that in its tests, SWIFT has not actually transferred value using real-world CDBCs, but instead has tested technology that has been proposed for CDBCs – which is not yet formally adopted to our knowledge.
“It’s also important to understand that in this context, we are referring to ‘wholesale’ CDBCs, which would be only transferred between credit institutions, rather than retail CDBCs, which would be held by consumers in wallets.”