The new alliance is a continuation of the efforts SWIFT began with Accenture last year and Central Bank of Digital Currencies network and RTGS system were able to conduct a cross-border transaction as a result of that collaboration
The interoperability of Central Bank of Digital Currencies (CBDC) is set to be tested by the bank messaging service, SWIFT (Society for Worldwide Interbank Financial Telecommunication) by interlinking several Central Bank of Digital Currencies networks in order to execute cross-border payments. To help carry out its experiments, the Belgium-based member-owned cooperative has approached digital services provider Capgemini besides currently linking financial institutions worldwide to communicate and execute financial payments. While there aren’t too many CBDCs around for SWIFT to experiment with right away, so far nine countries have brought CBDCs into use with China’s Digital Yuan (e-CNY) being one of the most widely experimented with digital currency.
An official blog post published on 19 May suggests that using CBDCs for cross-border payment solutions may have been a blind spot for the original idea of a digital currency since its development had the primary focus on resolving issues in line with domestic policies. However, Thomas Zschach, Chief Innovation Officer at SWIFT, expressed, to enable “frictionless” transfers across the borders, new different CBDC networks must work together and SWIFT will play a critical role.
“Capgemini and SWIFT are working together to develop a proof of concept to link a variety of CBDC networks along with other traditional currency networks. Globally, most central banks are creating CBDCs, ‘with a number of banks using different technologies, standards, and protocols for their digital currencies,” Zschach said.
As indicated in the company’s statement, for onward transmission, the company will develop a gateway that will intercept, translate, and send domestic Central Bank of Digital Currencies transactions to SWIFT. It will rely on existing SWIFT protocols, authentication models, and infrastructure. Over 11000 financial institutions are linked within 200 countries through SWIFT.
The new alliance is a continuation of the efforts SWIFT began with Accenture last year and Central Bank of Digital Currencies network and RTGS system were able to conduct a cross-border transaction as a result of that collaboration.
The experiments will demonstrate that SWIFT has the capability and the technical components to link different networks if they are successful.
SWIFT’s head of innovation Nick Kerigan said, “This would help CBDCs address a major industry problem. We can also assist central banks with making their own CBDC networks capable of cross-border payments.”
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