Paving the way for international finance

Global banking network SWIFT is setting the stage for a groundbreaking initiative that promises to integrate the growing number of central bank digital currencies (CBDCs) into the existing global financial infrastructure.

Scheduled to launch in the next 12 to 24 months, this new SWIFT platform is poised to have a significant impact on the growing CBDC ecosystem, aligning with the launch of major CBCCs globally.

SWIFT's CBDC trial involving 38 banks provides key insights

Currently, 90% of the world's central banks are developing or considering digital currencies, a move driven by the rapid rise of cryptocurrencies like Bitcoin and the complex technological challenges they pose. Swift's head of innovation, Nick Kerrigan, revealed insights from their latest experiment, which spanned six months and involved 38 different central banks, commercial banks and settlement platforms.

“We're looking at a roadmap to production (launch as a product) in the next 12-24 months, moving out of the experimental phase and into something real.” Kerrigan said.

This experiment, one of the largest international collaborations on CBCCs to date, was crucial in ensuring interoperability between different CBCCs despite different underlying technologies.

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The initiative demonstrated the potential of CBDCs in complex business and foreign exchange transactions and highlighted the possibility of automating processes to increase speed and reduce costs. The successful results provide a clear timeline for SWIFT to move from experimental stages to reality, aiming to maintain its dominance in the interbank communications network amid significant changes in the global financial landscape.

The United Arab Emirates and the Philippines will move forward with the CBCC initiative

In parallel with SWIFT efforts, the Central Bank of the United Arab Emirates (CBUAE) has begun implementing its CBCC strategy as part of the Financial Infrastructure Transformation (FIT) program. This strategy includes several pillars, including the mBridge project for real-value cross-border CBDC transactions and conceptual work aimed at establishing CBDC bridges with key trading partners such as India.

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) is also advancing its CBDC project and plans to launch a digital currency within two years. Like other central banks, the BSP intends to use the existing peso real-time general settlement system to develop a CBDC that will operate independently of blockchain technology.

This approach aims to enhance the efficiency, security and robustness of both domestic and international payment systems by complementing rather than replacing physical cash.

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These developments represent a significant shift towards digital currencies by central banks around the world, signaling a new phase in the digitization of financial systems and the potential for more streamlined, secure and efficient international transactions.