SWIFT Announces Success of Second Sandbox Connector Tests for CBDC and More

The Society for International Interbank Financial Telecommunications (SWIFT) messaging network has released the results of the second phase of sandbox testing of a central bank digital currency (CBDC) interlinking solution, which it calls Connector.

According to its report on the test results, the project identified four use cases, not all of which involved CBDC. Experimented with digital transactions with atomic (fast) settlement using smart contracts. Working with financial infrastructure firm CLS Group to connect token platforms to facilitate atomic issuance and payments, it demonstrated the potential of connecting existing foreign exchange infrastructure using CBDC.

The fourth use case is described as a “paper exercise accompanied by bilateral discussions” to reduce liquidity disruptions across platforms using the Liquidity Savings Mechanism algorithms.

The project uses R3's Corda and Hyperledger Fabric and Besu blockchains to demonstrate the interoperability between them. He concluded.

“The single point of access provided by SWIFT allows institutions to reuse existing channels, access new networks and reduce engagement costs.”

Swift emphasized that traditional financial solutions will continue to exist and require interoperability.

Once the sandbox testing is complete, SWIFT plans to further develop the beta version of the link, focusing on the implementation of smart contracts across networks, cryptographically locking and releasing across networks, and protecting information and programming capabilities across networks.

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More than 125 users have executed more than 750 simulated transactions to demonstrate the complexity of the SWIFT CBDC interoperability solution. Among those participating in the second stage of the sandbox are ANZ, Citibank, Deutsche Bank, DTCC, HSBC, Société Générale, Standard Chartered, Sumitomo Mitsui and Shanghai Commercial & Savings Bank, as well as at least seven central banks or monetary authorities.

The tests were announced in September. SWIFT completed its first pilot phase in March 2023.

SWIFT is looking far and wide for future use cases. It has been simultaneously experimenting with settlements using the consolidated ledger model. Like the CBCC sandbox, this study emphasized the ability to use existing technology, including SWIFT.

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