Swift Plans New System to Link Digital Currencies with Banking

Global bank messaging network Swift is getting ready to launch a new platform in the next one to two years. This platform will connect the growing number of central bank digital currencies (CBDCs) being developed with the current financial system.

This move is significant because Swift plays a crucial role in global banking. It will likely coincide with the launch of major CBDCs.

About 90% of the world’s central banks are considering digital versions of their currencies. They want to keep up with cryptocurrencies like bitcoin, but they are facing technological challenges.

Swift’s head of innovation, Nick Kerigan, said their latest trial involved a large group of central banks, commercial banks, and settlement platforms. It aimed to ensure that different countries’ CBDCs could work together, even if they use different technologies. This reduces the risk of payment system fragmentation. The trial also showed that CBDCs could be used for complex trade or foreign exchange payments and could potentially be automated to speed up and reduce costs.

Kerigan said the trial was successful, and Swift now has a timeline to work towards launching the new platform within the next 12-24 months.

Although the timeline could change if major CBDC launches are delayed, being ready when they do launch would be a significant advantage for Swift.

Some countries like the Bahamas, Nigeria, and Jamaica already have CBDCs in use. China is conducting real-life trials of its digital currency, the e-yuan. The European Central Bank is working on a digital euro, and the Bank for International Settlements is running cross-border trials.

Swift’s existing network connects over 11,500 banks and funds in more than 200 countries, making it highly usable.

The latest trial involved central banks from several countries, as well as major commercial banks. The goal is to create a global connection point for digital asset payments, streamlining the process for banks.

In addition to CBDCs, Swift is looking ahead to a future where trillions of dollar’s worth of assets could be “tokenized.” This means turning assets like stocks and bonds into digital assets that can be issued and traded in real time.

Kerigan believes that Swift’s system will become more scalable as more networks are connected to it. This would be beneficial for the industry as a whole.