SWIFT has completed the second phase of its central bank digital currency (CBDC) experimentation, marking a significant milestone in its exploration of this emerging financial landscape. The company’s six-month trial unveiled a range of potential applications for its CBDC solution.
Rather than creating its own CBDC, SWIFT has developed an interoperable solution named the SWIFT connector, aimed at linking existing CBDCs. Central to this solution is a layer of distributed ledger technology (DLT) and smart contracts, ensuring transparent and consistent transaction records.
The envisioned applications of the platform span digital trade, securities, and foreign exchange, with possibilities for future expansion into bank-led tokenized deposit networks. Notably, the platform leverages smart contracts to facilitate various traditional financial activities such as trade payments, foreign exchange, and liquidity-saving mechanisms.
During the testing phase, SWIFT employed multiple DLT networks, utilising platforms like Hyperledger Besu for tokenization, and R3 Corda and Hyperledger Fabric for buyer and seller networks and settlement instructions. The platform also incorporated atomic settlements and swaps, enabling instantaneous exchange of assets akin to traditional delivery versus payment (DVP) methods.
The testing phase, involving 38 institutions, was described as one of the most extensive CBDC experiments to date. Over 125 sandbox users conducted more than 750 transactions, underscoring the robustness and scalability of the platform. SWIFT engaged in collaborative discussions with participating financial institutions, further refining the use cases through 20 working group meetings.
Looking ahead, SWIFT intends to outline a production roadmap for the SWIFT connector, with progress contingent on market dynamics and readiness. This initiative comes amidst growing global interest in CBDCs, with countries like China, the Bahamas, Jamaica, and Nigeria actively exploring their implementation. Additionally, over 130 other countries and regions are investigating CBDCs, with notable developments in Europe, the Philippines, and Spain.
