SWIFT Network To Begin Exploring Cross-Border CBDC Payments
- SWIFT, in collaboration with Capgemini, is testing interlinking domestic CBDC networks.
- CBDCs are currently being explored by economies that account for 90% of the global GDP.
- China’s Chongqing municipality recorded $43 million worth of CBDC transactions as of this month.
Central Bank Digital Currencies have become a government favorite tool to usher the advancement of web3 and digital currencies.
Whether or not the countries looking into CBDCs legalize crypto has no impact on the rapid growth of the newest form of currency.
SWIFT To Connect CBDCs
With most countries now beginning to understand the demand and applications of digital currencies, CBDCs have been added to most of the countries’ agendas.
As per a report from the Bank of International Settlements (BIS), nine out of 10 central banks are actively looking into bringing CBDCs to the general public and into circulation.
Thus since the number of countries participating in digital currencies has increased significantly, SWIFT is seeking a way to bring them all together to create an interconnected network of CBDCs.
The Chief Innovation Officer at SWIFT, Thomas Zschach, said,
“Facilitating interoperability and interlinking between different CBDCs being developed around the world will be critical if we are to fully realise their potential. Today, the global CBDC ecosystem risks becoming fragmented with numerous central banks developing their own digital currencies based on different technologies, standards and protocols.”
SWIFT is a core part of global transactions, and it believes that fragmentation of CBDCs could hamper the ability of businesses and consumers to make cross-border payments using digital currencies.
Therefore, in collaboration with IT services company Capgemini, SWIFT will begin solving the interoperability issue.
By testing the network for its capability of interlinking, SWIFT intends to explore whether a highly scalable and easily integrated solution to make CBDC networks’ cross-border payments ready’ is achievable or not.
Use of CBDCs
While about nine countries have already brought CBDC into use, China’s digital yuan (e-CNY) has been one of the most widely experimented with digital currency.
By debuting it during the Winter Olympics in Beijing, China noted high volumes of usage among citizens and foreigners alike.
Recently China’s southwestern municipality Chongqing observed a total e-CNY trading volume of 288 million yuan or about $43 million from its 1.576 million transactions.
China’s central bank remarked that the usage of the CBDC in the Chongqing region was starkly higher than that of other regions.
This is because Chongqing is the host of 1.1 million e-CNY wallets, with over 96% of these wallets belonging to individual holders.
So if in a country such as China, where freedom of choice is questionable, CBDCs can flourish significantly, it leaves no room for doubt that the same could happen in other countries as well.