London: After experimenting with different technologies and currencies for 8 months, the financial messaging system SWIFT has made a plan for a global central bank digital currency (CBDC) network.
The trial, which included the central banks of France and Germany as well as international banks like HSBC, Standard Chartered (OTC: SCBFF), and UBS, looked at how CBDCs could be used internationally and even turned into fiat money if needed.
About 90% of the central banks in the world now use CBDCs, are testing them out, or are looking into them. Most people don’t want to be left behind by Bitcoin and other cryptocurrencies, but they are having trouble keeping up with the technology.
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SWIFT’s head of innovation, Nick Kerigan, said that its trial, which will be followed by more advanced testing over the next year, looked like a bicycle wheel with 14 central and commercial banks connected like spokes to its main hub.
The idea is that once the system is big enough, banks may only need one main global connection instead of thousands if they set up connections with each counterpart separately.
“We think there are a lot fewer connections that need to be made,” Kerigan said. “Because of this, there are likely to be fewer breaks (in the chain) and you are more likely to get more done.”
During the trial, different Distributed Ledger Technologies, which are a part of CBDC, were also tested. People have also said that the use of different technologies could be a problem for fast global adoption.
Citi, the clearing house Clearstream, and Northern Trust (NASDAQ:NTRS) also ran a separate trial on “tokenized” assets. These are traditional assets like stocks and bonds that have been turned into digital tokens that can then be issued and traded in real time.
CBDCs are already up and running in the Bahamas and Nigeria, among other places. China’s tests of an e-yuan in real life are well along, and the Bank for International Settlements, which is an umbrella group for central banks, has also been running tests across borders.
The main benefit of SWIFT, though, is that its network can already be used in more than 200 countries and links more than 11,500 banks and funds.
The Belgium-based company was almost unknown outside of the banking world until this year, when it cut off most of Russia’s banks from its network as part of the West’s punishment for Russia’s invasion of Ukraine.
Kerigan said that the same thing could happen in a new CBDC system, but he didn’t think it would stop countries from joining.
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“In the end, what most central banks want to do is give the people, businesses, and organisations in their jurisdiction a CBDC.”
“So it seems like a good idea to find a solution that is fast, works well, and lets as many other countries as possible in on the plan.”
