Plans to create a global central bank digital currency (CBDC) network are on the horizon following eight months of testing by SWIFT.
The Society for Worldwide Interbank Financial Telecommunication, better known as SWIFT, has been looking at ways to make CBDCs work globally, making them compatible with regular currencies.
Belgium-based SWIFT, which operates a global financial messaging system, said it would be experimenting with different technologies and currencies for cross-border payments earlier this year.
Both Germany and France’s central banks took part in the tests, along with banks like HSBC, Standard Chartered and UBS.
As the race to stay competitive steps up a gear, almost 90% of the world’s central banks are looking at how they can introduce CBDCs – and keep ahead of privately issued tokens.
Many are collaborating with the global central bank umbrella group, the Bank for International Settlements, which has also been running cross-border trials.
SWIFT as a central hub
SWIFT’s head of innovation, Nick Kerigan, described the framework as like a bicycle wheel, in which 14 central and commercial banks would connect like spokes to its central hub.
At scale, a single point of contact would more efficiently facilitate global transactions than thousands of disparate connections.
“We believe that the number of connections needed is much fewer,” Kerigan said. “Therefore, you are likely to have fewer breaks (in the chain) and you are likely to achieve greater efficiency.”
According to Kerigan, the trials, which also tested various distributed ledger technologies, another term for blockchain technology, will be followed by more advanced testing over the next year.
Countries such as China and the Bahamas, have led the way in CBDCs, but accessing SWIFT’s network could open the door to 11,500 banks across 200 countries.
“Ultimately what most central banks are looking to do is to provide us with a CBDC for the people, the businesses, and the organizations in their jurisdiction,” Kerigan said.
“So a solution that’s fast and efficient and that gains access to as many other countries as possible would seem to be an attractive one.”
EU seeks global crypto consensus
Meanwhile, as SWIFT hopes to create a global network for digital currency payments, the European Union is hoping to do the same with a regulatory framework.
The Markets in Cryptoassets (MiCA) legislation wants to bring consistency across the 27-member bloc by creating common rules. And the EU is hoping to win over U.S. officials during next week’s International Monetary Fund-World Bank annual meetings.
“The message I will be bringing to Washington is that here in the EU we have a piece of legislation, we are a front-runner in this,” said Mairead McGuinness, EU Commissioner for financial services.
But “a little bit like climate change, addressing crypto alone in the EU is not enough, we need to have global engagement and sharing of experience.”
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.