Hong Kong and Kazakhstan beta-testing Swift’s CBDC solution
“The financial community has already recognized the strong potential of our CBDC innovations for preventing digital islands while securely bridging the payment systems of today and the future.”
Swift is making significant strides in the realm of Central Bank Digital Currencies (CBDCs) by advancing its innovative solution for CBDC interoperability.
The company has revealed that three central banks are currently beta-testing this groundbreaking solution, while an expanded group of over 30 financial institutions is participating in sandbox experiments aimed at exploring further use cases.
2nd sandbox include RBA, Bundesbank, HKMA, Bank of Thailand, and CLS
Swift’s commitment to CBDC interoperability was reinforced after the initial success of sandbox testing, during which participants recognized the clear potential and value of the solution. Now, the beta version of Swift’s CBDC connector solution is being integrated with the infrastructure of three central banks and monetary authorities, including the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan, for direct testing.
In addition to the beta testing, Swift has initiated a second phase of sandbox experiments involving commercial banks, central banks, and financial market infrastructures. In this phase, participants are exploring various use cases, including trigger-based payments for digital trade platforms, foreign exchange models, delivery vs. payment mechanisms, and liquidity-saving techniques.
Notable institutions such as the Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand, and CLS are among the more than 30 leading entities participating in this expanded sandbox phase.
New digital currencies must coexist with each other and fiat currencies
Swift highlighted the importance of ensuring that new digital currencies can seamlessly coexist with each other and with existing fiat-based currencies and payment systems.
Tom Zschach, Chief Innovation Officer at Swift, said: “The financial community has already recognized the strong potential of our CBDC innovations for preventing digital islands while securely bridging the payment systems of today and the future.”
According to The Atlantic Council, CBDC exploration is on the rise, with 130 countries, representing 98% of global GDP, actively exploring CBDCs. In fact, 19 of the G20 countries are in advanced stages of CBDC development, with nine already in pilot phases. However, this proliferation of CBDC initiatives raises the possibility of a fragmented landscape across borders as countries primarily focus on domestic usage.
Swift, recognizing the potential challenges of fragmentation, has placed a strong emphasis on interoperability within its innovation agenda. The company’s work on CBDCs began over 18 months ago, and the initial phase of sandbox testing simulated nearly 5,000 transactions between different blockchain networks and existing fiat-based payment systems. Participants from central and commercial banks noted that Swift’s connector allowed for the seamless exchange of CBDCs, even when they were built on different platforms.
