SWIFT to test Central Bank Digital Currencies for international transfers
Bank messaging service, SWIFT, which dates back to the 1970s, is working to connect CBDCs such as eNaira to one another, as well as to traditional currencies as it attempts to stay current.
It has been announced Thursday that SWIFT has teamed up with French IT company, Capgemini to test cross-border central bank digital currency (CBDC) payments as part of a new study. SWIFT is the Belgian network used by banks in international money transfers. This is the second project undertaken by SWIFT on CBDC.
“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,” SWIFT’s chief innovation officer Thomas Zschach said.
- As indicated in the company’s statement, the company will develop a gateway that will intercept, translate, and send domestic CBDC transactions to SWIFT for onward transmission. 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. As a result of that collaboration, a CBDC network and RTGS system were able to conduct a cross-border transaction.
- 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.”
The SWIFT network processed 42 million messages every day last year, but transactions can take several days to process. As part of the international economic order, it tries to maintain its relevance, particularly in relation to CBDCs.
Some developers predict CBDCs will interact outside the traditional network, possibly using Ripple’s (XRP).