The trial, for the last month, has involved both France and Germany's national central banks as well as global lenders like HSBC, Standard Chartered, and UBS.
Around 90% of the world's central banks are now using, trialling, or looking into CBDCs. Most don't want to be left behind by Bitcoin and other cryptocurrencies, but are grappling with technological complexities. The trial will be followed by more advanced testing over 2023. The idea is that once scaled-up, banks may need only one main global connection, rather than thousands if they were to set up connections with each counterpart individually.
CBDCs are being seen as a step forward as they could be programmed to meet both governments' and individuals' specific needs, although they have also raised concerns about privacy and surveillance. SWIFT's trial also tested different underlying CBDC technologies known as Distributed Ledger Technologies. The use of various technologies has also been raised as a potential hurdle for rapid global adoption.
There was a separate trial too carried out with Citi, clearing house Clearstream, and Northern Trust on 'tokenised' assets - traditional assets like stocks and bonds transformed into digital tokens that can then be issued and traded in real-time.
Some countries such as the Bahamas and Nigeria already have CBDCs up and running. China is well advanced with real-life trials of an e-yuan, while central bank umbrella group, the Bank for International Settlements, has also been running cross-border trials.
The financial messaging system has made progress in cross-border crypto transfers recently, partnering Chainlink. The entities announced a proof-of-concept that will allow the international bank cooperative to transfer cryptocurrencies across most blockchains.
The collaborative proof-of-concept allows SWIFT to instruct token transfers across nearly every blockchain environment. Chainlink added that this would allow financial institutions to become blockchain-capable without confronting high upfront costs and development challenges.
Furthermore, SWIFT is taking part in what some believe to be a revolution in cross-border payments. The messaging system, along with EBA CLEARING and The Clearing House (TCH), announced that they are to deliver the Immediate Cross-Border Payments (IXB) pilot service.
The IXB pilot will use existing real-time payment systems – RTP in the US, run by TCH, and RT1 in Europe, run by EBA clearing. The connection between RTP and RT1 helps deliver a new way of moving money across borders. The IXB model is designed to allow the addition of further currency corridors in the future.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now