Three central banks have begun beta testing our innovative solution for interlinking CBDCs, marking a new milestone in our mission to facilitate interoperability between fiat and digital forms of value.
More and more countries are experimenting with their own forms of central bank digital currencies (CBDCs). And as interest in their potential continues to grow, we’re pleased to announce that our collaborative CBDC experiments have made exciting progress too.
Progress through collaboration
Our breakthrough work on central bank digital currency (CBDC) interoperability has entered a new phase, with three central banks now beta testing our innovative solution for interlinking CBDCs. Alongside this, 30 financial institutions are experimenting with the solution in a new sandbox to explore further use cases.
We’re committed to developing a beta version of our CBDC connector solution after a first iteration of sandbox testing, with participants recognising the solution’s ‘clear potential and value’. The beta solution has taken its next step, with three central banks and monetary authorities, including the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan, integrating the solution with their own infrastructure for direct testing.
We’ve also initiated a second phase of sandbox testing, in which commercial banks, central banks and financial market infrastructures are exploring additional use cases, including trigger-based payments for digital trade platforms, foreign exchange models, liquidity saving mechanisms and delivery vs payment. The Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand and CLS are among the enlarged group of more than 30 leading institutions in this second phase. 18 central and commercial banks took part in the first phase of the sandbox.
“Our focus is on interoperability – ensuring that new digital currencies can seamlessly coexist with each other and with today’s fiat-based currencies and payment systems,” said Tom Zschach, Chief Innovation Officer at Swift.
Facilitating interoperability between platforms
According to The Atlantic Council, 130 countries, representing 98% of GDP, are now exploring CBDCs. 19 of the G20 countries are in the advanced stages of CBDC development, with nine already in pilot. However, there is potential this development could lead to a fragmented landscape across borders, as most countries focus on domestic usage.
To counter this fragmentation, we’ve prioritised focus within our innovation agenda on interoperability for digital currencies and tokenised assets. Our goal is to enable them to seamlessly scale if and when they are deployed into the financial ecosystem.
Our specific work on CBDCs began more than 18 months ago. In the first phase of our experiments and sandbox testing, almost 5,000 transactions were simulated between two different blockchain networks and with existing fiat-based payment systems. Central and commercial bank participants noted that the connector enabled the seamless exchange of CBDCs, even for those built on different platforms.
“The financial community has already recognised the strong potential of our CBDC innovations for preventing digital islands, while securely bridging the payment systems of today and the future,” continued Zschach. “This next phase of testing and exploration will help us further refine the solution to ensure it is as effective as possible, and at scale.”