The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has revealed the outcomes of its second-phase sandbox testing for its central bank digital currency (CBDC) interlinking solution, dubbed a connector.
During the testing, SWIFT explored four distinct use cases, not all of which centered on CBDC. The trials delved into digital trading with instantaneous settlement via smart contracts and linked tokenization platforms to enable atomic delivery versus payment. Additionally, collaboration with financial infrastructure firm CLS Group showcased the connector’s capacity to link existing foreign exchange infrastructures using CBDC.
The fourth use case revolved around leveraging Liquidity Saving Mechanism algorithms to mitigate liquidity fragmentation across platforms, primarily through theoretical exercises and bilateral discussions.
Utilizing R3’s Corda and the Hyperledger Fabric and Besu blockchains, the project demonstrated the connector’s interoperability among various platforms. SWIFT emphasized that its single point of access could enable institutions to leverage existing channels, access new networks, and reduce participation costs.
CBDC Integration For SWIFT With Existing Systems
Moreover, SWIFT highlighted the enduring demand for interconnectivity among traditional financial solutions alongside emerging ones. With the sandbox experiments concluded SWIFT plans to enhance the beta version of its connector. This entails focusing on implementing smart contracts across networks, cryptographically securing and releasing tokens, and preserving data and token programmability across networks.
More than 125 users conducted over 750 simulated transactions to showcase complex use cases for the SWIFT CBDC interlinking solution. Notable participants in the second phase included ANZ, Citibank, Deutsche Bank, DTCC, HSBC, Société Générale, Standard Chartered, Sumitomo Mitsui, Shanghai Commercial & Savings Bank, and at least seven central banks or monetary authorities.
The commencement of these tests was announced in September, with the first testing phase concluding in March 2023. SWIFT continues to explore future use cases, including settlement using a unified ledger model, which underscores its commitment to leveraging existing technology alongside new innovations.
