SWIFT has announced the completion of a sandbox test for its API-based central bank digital currency project in collaboration with 18 banks.
The collaborative sandbox testing period lasted 12 weeks and involved almost 5,000 simulated transactions between two different blockchain networks and with existing fiat-based payment systems. According to SWIFT representatives cited by fintechnews.sg, the solution was able to support a seamless exchange of CBDCs, even those built on different platforms, which prompted a positive response from participants.
This sandbox testing environment was designed to allow central and commercial banks to analyse the solution, experiment with its features, validate its effectiveness, and share what they have discovered in order to assist with its development. In the following months, central banks will receive access to a beta version of the solution that will allow them to conduct further testing.
The sandbox’s second testing phase will allow the SWIFT community to focus on new use cases such as securities settlement, trade finance, and conditional payments.
Participants in this sandbox testing phase included Banque de France, the Deutsche Bundesbank, the Monetary Authority of Singapore, HSBC, BNP Paribas, Intesa Sanpaolo, NatWest, Royal Bank of Canada, SMBC, Société Générale, Standard Chartered and UBS, while four other central banks acted as observers and offered their feedback without actually participating in the tests. As for the total number of transactions, these banks processed 4,736 of them between the Quorum and Corda blockchain networks, and between Corda and a fiat currency.
SWIFT officials cited by fintechnews.sg talked about the important role that SWIFT can play in a financial ecosystem that includes both digital and traditional currencies. They also revealed that the testing participants expressed their desire for continued collaboration on interoperability.
In October 2022, SWIFT announced that it was working on a solution that would allow CBDCs to move between DLT-based and fiat-based systems. Back then, the financial messaging system had revealed a plan for a global central bank digital currency (CBDC) network following an 8-month experiment on different technologies and currencies.
The experiment initially involved France and Germany's national central banks as well as global lenders such as HSBC, Standard Chartered, and UBS. According to data from atlanticcouncil.org, about 90% of the world's central banks are in the process of trialling or looking into CBDCs, as they don't want to be left behind by Bitcoin and other cryptocurrencies. Technological complexities remain a problem, however.
The main idea behind SWIFT’s trial is that once scaled up, banks will only require one main global connection instead of thousands if they were to set up connections with each counterpart individually.
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