A new joint paper from SWIFT and Accenture looks at the opportunities and challenges of central bank digital currencies for international payments, sets out practical requirements for the adoption of digital currencies at scale, and outlines how SWIFT can support the financial community as new solutions are developed.
To help the financial community prepare for the possibility of moving payments in new forms of currency internationally, our research explores how central bank digital currencies (CBDCs) could work for cross-border payments.
Making CBDCs work for international payments
“Central Bank Digital Currency has emerged as an important new tool in the global push to modernise financial infrastructure to meet the needs of our increasingly digital and connected world,” says David Treat, a Senior Managing Director at Accenture who leads its Blockchain and Multi-Party Systems practice globally.
Indeed, today more than half the world’s central banks are actively exploring the use of CBDCs, a development that could lead to a profound change in the global payments ecosystem.
Our new paper explores the practicalities of such a shift – from the ways in which CBDCs would move across jurisdictions to their integration into the mix of currencies that already exist. It also unpacks what’s required for CBDCs to be a viable solution in international payments. These include a scalable interchange mechanism, institutions that can provide interoperability, a foreign exchange mechanism, standardised interoperable rich data, financial crime compliance, a strong governance model, and compatible local infrastructure.
Interoperability key to success
“Making payments infrastructure based on CBDCs efficient and interoperable with the broader economy presents some new challenges, but the majority are the same as those faced by existing payment solutions,” says Thomas Zschach, Chief Innovation Officer, SWIFT.
While CBDCs will present new challenges and opportunities, the paper concludes there is little advantage in reinventing the wheel. Interoperability will be key to their success, and the smart approach will be to pragmatically combine new solutions with existing infrastructure to derive maximum benefit.
To that end, SWIFT is undertaking a deeper dive into CBDCs through thought leadership and experimentation over the coming months. This includes trials to see how our evolving platform and renewed focus on transaction management services under our new strategy to enable instant, frictionless payments across 4 billion accounts globally – agnostic of standards, technologies and currencies – could interact with the cross-border use of CBDCs.
“SWIFT is an integral part of the financial services infrastructure and will play a critical role supporting its members as CBDC begins to transform the landscape,” says Treat. “We welcome this partnership and are eager to continue to drive responsible and valuable innovation together."
Building on existing infrastructure
In collaboration with the SWIFT community, we intend to explore the role that SWIFT could play further – both as a carrier of authenticated information about CBDC transactions, as we do today for fiat currencies, and as a carrier of actual CBDC value in whatever form it is issued.
“As a co-operative that is neutral and currency agnostic, with reach across 11,000 institutions in more than 200 countries, and oversight by central banks globally, SWIFT is well placed to engage closely in the debate and any future evolution of money,” says Zschach. “We look forward to actively supporting our community on issues related to CBDCs and driving responsible innovation aligned with our strategic vision for instant end-to-end transactions.”