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SWIFT tests CBDC interoperability to enable cross-border payments

SWIFT tests CBDC interoperability to enable cross-border payments

The well-known global financial messaging service, SWIFT, is set to test the Central Bank Digital Currency (CBDC) by interconnecting multiple CBDC networks to execute cross-border payments. In addition to currently linking financial institutions around the world to communicate and execute financial payments, the Belgium-based network approached consultancy firm Capgemini and French IT services to drive the project forward.

An official blog post published on May 19 suggests that the use of CBDC for cross-border payment solutions may have been a blind spot for this type of digital currency, as its development was primarily intended to solve problems in accordance with national policies. . However, Thomas Zschach, Chief Innovation Officer at SWIFT, said new and different CBDC networks need to work together to enable “frictionless” cross-border transfers, and SWIFT will play a critical role.

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Facilitating interoperability and interconnection between the various CBDCs that are being developed around the world will be essential if we want to realize their full potential. Today, the global CBDC ecosystem is at risk of becoming fragmented with many central banks developing their own digital currencies based on different technologies, standards, and protocols.

Similarly, Nick Kerigan, director of innovations at SWIFT, noted that when CBDCs are increasingly seen as “a new form of fiat currency”, too many such projects will enter the development that links traditional financial infrastructure.

SWIFT, currently accessible to more than 11,000 financial institutions in more than 200 countries, will pave the way for the implementation of CBDC to enable “a highly scalable and easily integrated solution” for cross-border payment transfers.

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SWIFT finds solutions with the collaboration of CBDCs

Furthermore, experiments at the core of its functionality include the deployment of a gateway to the central bank of the digital currency network, as the official blog post notes.

The gateway will intercept cross-border transactions on the network, translate them and send them to the SWIFT platform for transmission to another CBDC network or established payment system.

Citing the collaboration with Capgemini, the publication revealed that the giant company will focus on implementing three use cases, including fiat to CBDC, CBDC to CBDC, and CBDC to fiat. Not only that, but SWIFT also has plans beyond the CBDC and is trying to achieve interoperability between virtual assets and other currencies.

SWIFT, also known as the Society for Worldwide Interbank Financial Telecommunications, is the world’s largest financial messaging system. But it has been in the spotlight ever since the West decided to exclude Russia due to the Russo-Ukrainian conflict. As it should be, financial institutions faced problems in the region and lost their stability.

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The West made this decision to cut off Russia’s financial sources so that the state cannot liquidate assets and prevent it from transferring funds to institutions that are part of the system. Although the move was intended to punish and isolate the nation, it instead drew criticism primarily from China and Russia. As a result, they planned to switch to their own messaging system to fight US sanctions.

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