Central Banks Enter SWIFT’s CBDC Project Beta Phase

On September 13th, SWIFT made a significant announcement regarding its Central Bank Digital Currency (CBDC) interoperability project. This development saw the inclusion of three additional central banks in the beta phase, coinciding with an expansion of SWIFT’s sandbox testing program that initially commenced in March.

New Entrants to SWIFT’s CBDC Interoperability Project

The central banks embarking on this journey with SWIFT’s CBDC interoperability project are the Hong Kong Monetary Authority, the Central Bank of Kazakhstan, and an undisclosed central bank. These institutions have seamlessly integrated their infrastructure with SWIFT’s “CBDC connector solution” and are poised to commence direct testing and collaborative efforts.

Growing Participation in Sandbox Testing

This recent development builds upon the initial phase of sandbox testing, which boasted an impressive lineup of over 18 participants. Notable entities in this phase included the Royal Bank of Canada, Banque de France, Société Générale (EPA:SOGN), BNP Paribas (EPA:BNPP), Monetary Authority of Singapore, HSBC, Deutsche Bundesbank, and NatWest. Over a span of 12 weeks, the sandbox facilitated more than 5,000 transactions, with the program on track to include over 30 leading institutions.

SWIFT’s Expanding Role in CBDC Interoperability

SWIFT’s foray into the realm of Central Bank Digital Currencies encompasses a range of projects. One notable endeavor involves collaboration with the New York Federal Reserve Bank on a wholesale CBDC project that leverages a regulated liability network. While SWIFT’s traditional role in enabling bank-to-bank communication remains crucial, the advent of CBDCs introduces the potential for competition.

Entities like the Bank for International Settlements have also initiated CBDC bridging projects, reflecting the capacity of new technologies to challenge established systems and drive innovation.

SWIFT’s Enhanced Network Speed in Beta Phase

The beta phase has witnessed a significant boost in SWIFT’s network processing speed. In August, the banking system achieved noteworthy milestones in its core operations, proudly announcing that its network processed an impressive 89% of transactions within a one-hour timeframe. This achievement surpasses the G20’s goal of achieving 75% one-hour settlements by 2027. Furthermore, 84% of transactions on the SWIFT network were directly executed or involved a single intermediary. However, it’s essential to consider that, in practice, only 60% of wholesale payments concluded within an hour.

Several factors contributed to this deviation from the network’s capabilities, including regulatory controls, working hours, and batch processing. SWIFT continues to play a pivotal role in the evolving landscape of CBDCs, promising further advancements in the near future.

Leave a Comment