Swift, the leading interbank messaging protocol for cross-border payments, has successfully completed the first phase of pilot testing for interoperability with CBDC. The successful outcome of the tests paves the way for the development of a beta version of the system.

Globally, most central banks and commercial banks in more than 100 countries are exploring the use of digital currencies issued by central banks. In order to maximise the benefits, CBDCs need to be able to interact within the international payment system, with each other and with existing fiat currencies.

In this context, in October 2022, Swift stated that it had developed a protocol for CBDC to move through systems based on blockchain technology and interact with fiat currencies. A technological breakthrough that would facilitate and streamline international transactions and cross-border payments, beyond traditional systems.

The recent press release announcing the successful testing of interoperability between the global interbank messaging cooperative and digital currencies is an important step towards achieving the goal of digital assets interacting with their traditional counterparts seamlessly, through a payment solution that delivers value to customers and financial institutions.

Accelerating large-scale implementation

The first phase of pilot testing lasted 12 weeks and involved 18 central and commercial banks, including the central banks of France, Germany and Singapore, as well as BNP Paribas, HSBC and UBS, among others.

Tom Zschac, Chief Innovation Officer at Swift, noted that “almost 5,000 transactions were successfully simulated between two different blockchain networks and with existing fiat currency-based payment systems“, and that “many of the participating banks have made clear their desire for continued cooperation on interoperability”.

In collaboration with another group including Cite, Clearstream, Northern Trust and SETL, it was also demonstrated how this same infrastructure can be used to interconnect multiple tokenisation platforms with different types of cash payments, simulating transfers in the secondary bond market.

The next step will be to develop a beta version for the second phase of testing to demonstrate new use cases and other practical applications and functionalities, such as securities settlement or trade finance, across different platforms of the more than 11,500 financial institutions that are part of the Swift ecosystem.

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