SWIFT plans to launch a new platform for central bank digital currencies within 12 to 24 months – March 25, 2024 at 7:40 p.m.

Global banking messaging network SWIFT plans to launch a new platform within the next one to two years to connect the wave of central bank digital currencies currently under development to the existing financial system, the network told Reuters.

This initiative, which would be one of the most important to date for the nascent CBDC ecosystem given SWIFT's key role in global banking, will likely come into focus when the first major currencies are launched.

Around 90% of central banks around the world are currently exploring the possibility of creating digital versions of their currencies. Most of them do not want to be left behind by bitcoin and other cryptocurrencies, but they face technological complexities.

Nick Kerigan, head of innovation at SWIFT, said its latest trial, which lasted six months and involved a 38-member group made up of central banks, commercial banks and settlement platforms, had been one of the largest global collaborations on CBDCs and tokenized assets to date.

The aim was to ensure that different countries' CBDCs could be used together, even if they are built on different underlying technologies, or “protocols”, thereby reducing the risks of fragmentation of payment systems.

It also showed that they could be used for very complex trade or foreign exchange payments and could be automated to speed up processes and reduce costs.

Mr Kerigan said the results, which also proved banks could use their existing infrastructure, were widely seen as a success by participants and gave SWIFT a work schedule.

“We're looking at a road map for a product launch in the next 12 to 24 months,” Mr. Kerigan said in an interview. “We are moving from the experimental stage to something that becomes a reality.

Although the timeline may still be altered if the launch of major economies' CBDCs is delayed, being ready for that time would be a major asset in maintaining SWIFT's dominant position in the interbank plumbing network.

Countries like the Bahamas, Nigeria and Jamaica have already implemented CBDCs. China is well advanced with real-world trials of an e-yuan. The European Central Bank has also implemented a digital euro, while the Bank for International Settlements, the umbrella group of global central banks, is carrying out numerous cross-border trials.

SWIFT's main advantage is that its existing network is already usable in more than 200 countries and connects more than 11,500 banks and funds that use it to send trillions of dollars every day.

AN SCALABLE OPTION

The company, which was virtually unknown outside banking circles, has become a household name since 2022, when it cut off most Russian banks from its network as part of sanctions imposed by the West following the invasion of Ukraine.

Mr Kerigan said this type of action could still happen in a new CBDC system, but he doubts this would prevent countries from joining.

Its latest trial involved the central banks of Germany, France, Australia, Singapore, the Czech Republic and Thailand, as well as a number of countries that asked to remain anonymous.

A range of leading commercial banks, including HSBC, Citibank, Deutsche Bank, Société Générale, Standard Chartered and foreign exchange settlement platform CLS, also participated, as did at least two Chinese banks.

The idea is that once the interconnection solution is scaled up, banks will have one main global connection point capable of processing digital asset payments, instead of thousands if they had to create one individually with each counterparty.

In addition to the move towards CBDCs, Mr. Kerigan discussed the Boston Consulting Group's (BCG) predictions that by 2030, assets worth around $16 trillion could be “tokenized” – a process by which assets such as stocks and bonds are transformed into digital chips which can then be issued and traded in real time.

“If we can connect any number of networks (to the SWIFT system), it becomes a much more scalable option for the industry,” he said.

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