SWIFT Says It Can Resolve a Major Obstacle to CBDC Adoption

SWIFT is already being used to connect more than 11,500 banks and funds across 200 countries, making it a potentially excellent candidate for becoming the standard for cross-border CBDC settlements

article-image

Source: Shutterstock

share

key takeaways

  • SWIFT says it is ready to take on CBDC cross border payments
  • The development is a sign that central banks are starting to seriously think about infrastructure related to the roll out of nation-backed digital currencies

Financial infrastructure company SWIFT on Wednesday said it has solved a particularly vexing problem for central bank digital currencies (CBDCs): how to transact between different blockchains. 

The development is one indicator that central banks are, at last, starting to seriously map out the massive, costly infrastructure required to roll out digital currencies backed by countries, according Kenneth Goodwin, Blockchain Intelligence Group’s director of regulatory and institutional affairs. SWIFT’s own outline has been at least eight months in the making.

Goodwin, who also works with Project Hamilton — an economic think tank that works with the Boston and New York Federal Reserves — said SWIFT’s scale adds weight to its blueprint.

“The central banks are basically saying — these governments are saying, ‘How do we have the right network infrastructure that’s going to prepare us…to actually do these executions on a digital platform that’s very secure?” Goodwin said. “And that’s where SWIFT comes into play.”

One reason the research has taken so long, according to Goodwin: the thorny choice between incorporating CBDCs with SWIFTs’ existing payment rails or competing against a crypto-native competitor such as Bitcoin’s Lightning Network.

Lightning Network, a layer-2 payment protocol built atop Bitcoin’s core blockchain, taps the newly-created Taro protocol for issuing assets such as stablecoins — and potentially CBDCs — on the blockchain, then utilizing Lightning to execute transactions. 

“SWIFT has successfully shown that Central Bank Digital Currencies (CBDCs) and tokenised assets can move seamlessly on existing financial infrastructure – a major milestone towards enabling their smooth integration into the international financial ecosystem,” SWIFT said in a statement. 

The team conducted two separate experiments and found that digital currencies and assets can flow smoothly alongside, and interact with, their traditional financial counterparts on the network. 

SWIFT is already being used to connect more than 11,500 banks and funds across 200 countries.

When it comes to establishing a CBDC system that works worldwide, “it all has to do with infrastructure, but it also has to do with familiarity,” Goodwin said.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

The Department of Justice and Commodity Futures Trading Commission announced back-to-back lawsuits against KuCoin Tuesday

article-image

Judge Failla found that Coinbase didn’t operate as an unregistered broker in offering its wallet service

article-image

A fund by Laser Digital offers investors exposure to the Polygon network, while a new 21Shares ETP focuses on staking rewards from Toncoin

article-image

Sponsored

The TRON network’s integration into Dune brings a wealth of data and insights to the fingertips of users

article-image

A BTC futures fund offered by Hashdex and Tidal Investments has gotten regulatory clearance to hold bitcoin directly

article-image

At launch, Chain Signatures will be compatible with Bitcoin, Ethereum and Cosmos network chains, as well as DogeCoin and XRP Ledger