The bank messaging service, which dates back to the 1970s, is looking to connect CBDCs to each other and to traditional currencies as it tries to stay up to date.
The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, the Belgian financial messaging network used by banks in international money transfers, announced Thursday that it is teaming up with French IT company Capgemini to conduct experiments with cross-border central bank digital currency (CBDC) payments. This is SWIFT’s second research project on CBDC.
SWIFT and Capgemini are testing ways to link multiple CBDC networks, as well as CBDC and traditional currency networks, as a proof of concept. The majority of central banks worldwide are working on creating CBDCs, “with numerous central banks developing their own digital currencies based on different technologies, standards and protocols,” Thomas Zschach, SWIFT chief innovation officer, said in a statement.
According to the company’s statement, it is developing a gateway for domestic CBDC networks to intercept cross-border transactions, translate them and forward them to the SWIFT platform for onward transmission. The system will use existing SWIFT standards, authentication models and infrastructure. SWIFT connects over 11,000 financial institutions in over 200 countries.
SWIFT’s new alliance is a continuation of the efforts begun last year with American professional services company Accenture. That collaboration succeeded in creating a cross-border transaction between a CBDC network and “an established real-time gross settlement (RTGS) system.”
“If the experiments are successful, it will demonstrate that SWIFT has the capability and technical components to interlink different networks,”
SWIFT head of innovation Nick Kerigan said. “This would help solve a huge technology and industry challenge facing CBDCs. And it could enable us to help central banks make their own CBDC networks cross-border payment ready.”
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SWIFT processed 42 million messages a day last year, but transactions on the network can take several days to complete. It is striving to maintain its relevance in the international economic order, especially in regard to CBDCs. Many developers foresee CBDCs interacting outside the traditional network, potentially with the aid of Ripple’s (XRP).