Key facts:
SWIFT wants to prevent CBDCs from fragmenting the international financial system.
The interoperability of the financial system is a priority for SWIFT, according to a statement.
The payments and financial transactions platform, SWIFT, is testing Central Bank Digital Currencies (CBDCs). The objective of the institution is to allow international payments to be made with these new currencies, connecting different financial systems.
The global payment provider is testing cross-border payments with CBDCs, as according to a report by the Bank for International Settlements (BIS) that quote in a post, 9 out of 10 banks are preparing to launch their digital currenciesan indication of the growing interest of countries in having their own digital currencies, which could be used by millions of people within a few years.
SWIFT, an organization established in Belgium, is working together with the consulting firm Capgemini to test this concept of cross-border payments with CBDC, which for your consideration have global compatibility and interoperability challengessince they are currencies designed primarily to comply with local policies.
Facilitating interoperability and connection between different CBDCs that are being developed in the world will be critical to exploiting its potential. Today, the global CBDC ecosystem is at risk of becoming fragmented with numerous central banks developing their own currencies based on different technologies, standards and protocols.
Thomas Zschach, Head of Innovation at Swift.
The interoperability of financial systems turns out to be very difficult to achieve and is even an issue that has been worked on in the field of cryptocurrencies. Although it has been possible to establish bridges between different networks such as Ethereum, Solana, Bitcoin, RSK, it is still a topic of discussion that many have reservations about.
Domination of the global financial system “We do not want digital fragmentation”
The goal is to convert CBDC currencies to national fiat, and vice versa. Likewise, they raise the possibility of exchanging the CBDC of a country for any other digital currency that is legal tender in different countries. The ultimate goal, they describe, is to achieve interoperability and prevent a fragmentation of the financial system from occurring..
SWIFT is already working with China to ensure that the digital currency of this country’s central bank can be integrated into the international financial system, CriptoNoticias reported in February 2022.
A factor that could further accentuate the displacement of the US dollar as the predominant currency worldwide for financial transactions, if another central bank digital currency does not rise in the international market.
SWIFT also assures that it could carry out experiments to facilitate the interoperability of CBDCs with other assets and digital currencies that are regulated or in the process of being regulated, citing a own report where cryptocurrencies are included.
CBDCs are in the sights of many countries, such as Mexico, Peru and Jamaica, who seek to implement digital currencies from the direction of their central banks, as opposed to the use of bitcoin (BTC) and cryptocurrencies.
The fundamental difference of CBDCs with Bitcoin is that they are oriented towards central planning, surveillance and tracking of financial transactions.
On the other hand, other platforms such as Visa are also seeking to overcome interoperability challenges and join the networks of CBDCs under construction, reported this medium.