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Central Bank Digital Currency Platform Intends To Launch Within 12-24 Months

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SWIFT, a banking cooperative providing services related to the execution of financial transactions and payments between limited banks worldwide, announced it intends to launch a central bank digital currency (CBDC) platform within the next 1-2 years.

SWIFT’s principal function, according to Wikipedia, is “to serve as the main messaging network through which limited international payments are initiated.”

“Swift today announced the findings of the second phase of industry-wide sandbox testing on its central bank digital currency (CBDC) interlinking solution, with the results showing that its connector can enable financial institutions to carry out a wide range of financial transactions using CBDCs and other forms of digital tokens, easily incorporating them into their business practices,” SWIFT stated in a press release.

“Swift solution could enable financial institutions to easily incorporate CBDCs and other digital assets into common business practices,” SWIFT stated.

Wall Street Apes writes:

“While we were all busy watching the horrors of the Francis Scott Key Bridge collapse, this story was buried in the news”

SWIFT Planning Launch of New Central Bank Digital Currency Platform in 12-24 Months

What are the odds this press release happens the same day?

“SWIFT is planning a new platform in the next one to two years to connect the wave of central bank digital currencies now in development to the existing finance system, it has told Reuters”

“”We are looking at a roadmap to productize (launch as a product) in the next 12-24 months,” Kerigan said in an interview. “It’s moving out of experimental stage towards something that is becoming a reality.”

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Reuters reports:

The move, which would be one of the most significant yet for the nascent CBDC ecosystem given SWIFT’s key role in global banking, is likely to be fine-tuned to when the first major ones are launched.

Around 90% of the world’s central banks are now exploring digital versions of their currencies. Most don’t want to be left behind by bitcoin and other cryptocurrencies, but are grappling with technological complexities.

SWIFT’s head of innovation, Nick Kerigan, said its latest trial, which took 6 months and involved a 38-member group of central banks, commercial banks and settlement platforms, had been one of the largest global collaborations on CBDCs and “tokenised” assets to date.

It focused on ensuring different countries’ CBDCs can all be used together even if built on different underlying technologies, or “protocols”, thereby reducing payment system fragmentation risks.

It also showed they could be used in highly complex trade or foreign exchange payments and potentially be automated so to both speed up and lower the costs of the processes.

Kerigan said the results, which had also proven banks could use their existing infrastructure, had been widely regarded as a success by those who took part and given SWIFT a timeline to work to.

“A CBDC must be resisted at all costs. It is the ultimate totalitarian tool. Likewise, a centralized, shadowy, non-transparent platform like SWIFT must also be resisted — and phased out — in favor of open, decentralized, transparent platforms,” Mark Jeffrey writes.

“SWIFT, the payment messaging system which is utilized by the majority of the global banks, have announced they’re setting up a CBDC platform that’s coming out in 12 to 24 months,” George Gammon said.

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“Over the last six months, we’ve been working with 38 global institutions on one of the largest CBDC experiments to date. And we’re really excited about the results. In the second phase of sandbox testing, we explored more complex use cases. We successfully used our solution to interlink and orchestrate transactions across simulated digital trade, digital asset and FX networks, and CBDCs for payments. Over the course of the project, over 125 sandbox users made more than 750 transactions,” SWIFT wrote.

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From SWIFT:

In one of the largest known collaborations on CBDCs, 38 institutions – including central and commercial banks as well as market infrastructures – took part in experiments which found that Swift’s solution has the potential to simplify and speed up trade flows, unlock growth in tokenised securities markets, and enable efficient FX settlement – all while allowing financial institutions to continue to make use of their existing infrastructure.

Interoperability is critical to Swift’s strategy for instant and frictionless transactions. The cooperative has focused its innovation agenda on interoperability between digital currencies and tokenised assets to overcome the potential risk of fragmentation, caused by the development of digital currencies on different technologies and with different standards and protocols. Swift’s solution has already been shown to enable cross-border transfers and connect CBDCs on different networks with each other, as well as with fiat currencies.

The second phase of sandbox testing went further, exploring more complex use cases, using Swift’s solution to connect and orchestrate transactions across simulated digital trade and tokenised asset and FX networks, alongside CBDCs for payments. More than 750 transactions were carried out over the course of the experiments.

In digital trade, the collaborative experiments successfully demonstrated interoperability between different digital networks and trade platforms, with Swift’s solution facilitating atomic trade payments – payments that are completed simultaneously, alongside the transfer of assets, rather than sequentially. Smart contracts and event-driven programming enabled the automation of payments only once certain conditions had been met, meaning trade flows could potentially become automated 24 hours a day, seven days a week. Participants also highlighted the solution’s potential to reduce delays in global trade, enhance trust among parties, and significantly lower transaction costs.

In securities, the lack of interoperability between tokenisation platforms is a barrier to the growth of tokenisation. The experiments showed that Swift’s solution was able to interlink multiple asset and cash networks and could facilitate atomic delivery versus payment across those platforms. Tokenisation is a new market which is attracting widespread industry interest due to its potential to improve liquidity, lower transaction costs, and enhance transparency and security.

Finally, the experiments showed that the connector could play a role in foreign exchange. Working closely with CLS, the connector was shown to be interoperable with the existing market infrastructure, facilitating FX netting and settlement via CBDCs.

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