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Swift has moved into a second testing phase for its Central Bank Digital Currency (CBDC) connector, with three central banks currently engaged in beta testing for this interoperability solution.
The Brussel-based financial messaging and infrastructure specialist indicates that it is committed to developing a beta version of this CBDC connector after a phase of sandbox testing, with the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan applying this solution within their payments infrastructure for direct testing.
With around 130 countries evaluating the potential benefits of CBDCs, Swift notes that parallel development initiatives could lead to fragmentation for CBDC cross-border payments, given that many countries are focusing on their domestic use cases.
To address this, Swift is developing a solution to support interoperability across digital currencies and tokenised assets.
The first phase of its CBDC experiments and sandbox testing involved more than 5000 payments transactions simulated between two different blockchain networks and with existing fiat currency payments infrastructure.
Swift has launched a second phase of sandbox testing, which also includes commercial banks, central banks and financial market infrastructures. This testing phase will include trigger-based payments for digital trade platforms, foreign exchange models, DvP settlement and liquidity saving mechanisms.
Deutsche Bundesbank, Bank of Thailand, CLS, HKMA and The Reserve Bank of Australia are included in an expanded group of more than 30 institutions involved in this second testing phase.
Swift’s chief innovation officer Tom Zschach explains: “Our focus is on interoperability – ensuring that new digital currencies can seamlessly coexist with each other and with today’s fiat-based currencies and payment systems.
“The financial community has already recognised the strong potential of our CBDC innovations for preventing digital islands while securely bridging the payment systems of today and the future,” he adds. “This next phase of testing and exploration will help us further refine the solution to ensure it is as effective as possible, and at scale.”
