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Swift reports positive results from CBDC pilot test and continues with next phase of testing


Swift reports positive results from CBDC pilot test and continues with next phase of testing

Source: AdobeStock / vectorfusionart

International payment system Swift has reported positive results from a pilot test of transfers between different central bank digital currencies (CBDCs), saying it sees “clear potential and value”.

The pilot test specifically looked at how different CBDCs can interact through an API-based CBDC connector, using two different blockchain networks and existing fiat-based payment systems.

According to a press release issued by Swift, all participants in the pilot project expressed “strong support” for the solution to continue to be developed. Participants also agreed that the CBDC connector used in the simulations enabled “seamless exchange of CBDCs,” and said this was also true for transfers between CBDCs built on different platforms.

The latter is considered essential, given the risk of fragmentation as central banks around the world all build their own CBDCs.

Swift CBDC connector. Source: CBDC Swift Sandbox Project – Results Report

Following the conclusion of the pilot test, Swift will now develop a beta version of the system for further testing by central banks. After that, a second phase of sandbox testing will be held for participants to explore new use cases, including in securities settlement, trade finance and conditional payments, Swift said in the press release. .

5,000 simulated transactions

18 central and commercial banks participated in the study, which covered 5,000 simulated transactions carried out over a 12-week period. Participating banks included major international players like HSBC, Standard Chartered and NatWest, as well as central banks like Deutsche Bundesbank and the Monetary Authority of Singapore.

In a comment, Tom Zschach, Swift’s chief innovation officer, said the study showed that Swift can continue to play a vital role in a financial ecosystem where traditional currencies and CBDCs coexist.

“Our API-based CBDC connector has proven robust across nearly 5,000 transactions between two different blockchain networks and a traditional fiat currency, and we’re thrilled to have the support of our community to develop it further,” said- he declared.

BIS also reports successful CBDC test

The results of Swift’s study come just days after the Bank for International Settlements (BIS), sometimes referred to as “the central bank of central banks,” released the results of its own pilot study on the use of CBDCs in cross-border transactions.

According to the BIS study, it is possible for central banks to have “almost complete autonomy” over the design of their own CBDC, while making the CBDC interoperable with other countries’ CBDCs for cross-border transactions.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.