As the majority of the world’s Central Banks are now developing or researching the prospects of Central Bank Digital Currencies (CBDCs), the Society for Worldwide Interbank Financial Telecommunications has detailed how these individual CBDCs can co-exist in a global setting.
As detailed by SWIFT‘s head of innovation Nick Kerigan, the trial involved as many as 14 central and commercial banks, including the Deutsche Bundesbank, Banque de France, Standard Chartered, UBS, and HSBC saw all these participating entities connect through a single hub.
“We believe that the number of connections needed is much fewer,” Kerigan said. “Therefore, you are likely to have fewer breaks (in the chain) and you are likely to achieve greater efficiency.”
The trial is billed to be followed by more detailed and specific testing in the coming months, with additional perspectives set to be investigated.
SWIFT is an electronic system that allows banks all over the world to send information and payments to each other, following its 8-month investigation into the cross-border transaction capabilities of CBDCs concluded that a single viable central connection can suffice in keeping all of the individual e-fiat notes together.
While SWIFT has a very viable proposal to connect CBDCs the way it has connected financial players transacting using fiat and digital money, the body may have an unexpected rebuttal to deal with.
With the outbreak of the war between Russia and Ukraine, SWIFT blocked financial institutions from Russia in compliance with broader financial sanctions from Western watchdogs. This move may prevent some Central Banks from linking their CBDCs to the SWIFT system for any likely instance of censorship in the future.
While this fear remains a viable one, Kerrigan believes the focus for partners will be different.
“Ultimately, what most central banks are looking to do is to provide us with a CBDC for the people, the businesses and the organisations in their jurisdiction,” he said, “So a solution that’s fast and efficient and that gains access to as many other countries as possible would seem to be an attractive one.”
Image source: Shutterstock