Swift pilot lays foundation for use of CBDCs and tokenised assets in global finance

Following a series of experiments, Swift has concluded that central bank digital currencies (CBDCs) and tokenised assets are able to move “seamlessly” on existing financial infrastructure.

Swift says CBDCs and tokens can move “seamlessly” on existing infrastructure

Calling it a “major milestone”, the experiments demonstrate that it is possible to integrate CBDCs and tokenised assets into the global financial ecosystem.

Swift says the findings, which come from two separate experiments, solve the “significant challenge” of interoperability in cross-border transactions by bridging different distributed ledger technology (DLT) networks and existing payment systems, “allowing digital currencies and assets to flow smoothly alongside, and interact with, their traditional counterparts”.

It adds that as CBDCs and tokens develop, they can be deployed at scale to facilitate trade and investment between more than 200 countries and territories around the world.

In collaboration with Capgemini, Swift says it achieved CBDC-to-CBDC transactions between different 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.

Fourteen central and commercial banks, including Banque de France, the Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo, are now collaborating in a testing environment to work towards full-scale deployment.

The success of the experiment shows that the blockchain networks can be interlinked for cross-border payments through a single gateway, “and that Swift’s new transaction management capabilities could orchestrate all inter-network communication,” the organisation adds.

In a separate experiment, Swift collaborated with Citi, Clearstream, Northern Trust and blockchain firm SETL. Here, Swift demonstrated that its infrastructure can serve as an “interconnector” between multiple tokenisation platforms and different types of cash payment.

“Digital currencies and tokens have huge potential to shape the way we will all pay and invest in the future. But that potential can only be unleashed if the different approaches that are being explored have the ability to connect and work together,” explains Tom Zschach, chief innovation officer at Swift.

Calling inclusivity and interoperability the “central pillars” of the financial ecosystem, Zschach says that for CBDCs, Swift’s solution will enable central banks to connect their own networks directly to all 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 are realised at the earliest opportunity, by as many people as possible,” he adds.