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SWIFT Unites CBDCs & Traditional Banking for Harmony

SWIFT Unites CBDCs & Traditional Banking for Harmony

SWIFT intends to launch a new platform to connect CBDCs to the traditional banking system.
Almost 90% of central banks worldwide are investigating digital versions of their currencies.
The study revealed CBDCs’ ability to support complex commerce and foreign exchange payments.
SWIFT, the worldwide bank messaging network, has announced that it will create a new platform. This site aims to connect the emerging central bank digital currencies (CBDCs) with the existing financial system. The move marks a significant milestone for the CBDC ecosystem, leveraging SWIFT’s dominant position in the banking industry. The move aligns with the launch schedules of key CBDCs.

About 90% of the world’s central banks are considering digital editions of their currencies. They want to be at the forefront of financial innovation, fueled by the rise of Bitcoin (BTC) and other digital currencies. Nonetheless, these companies are dealing with technological challenges. The SWIFT project aims to overcome these challenges by making the various CBDCs interoperable despite differences in underlying technologies.

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Global banks test CBDCs in a major SWIFT trial.

Nick Kerigan, SWIFT’s head of innovation, announced the results of a six-month pilot. The study collaborated with 38 institutions, including central banks, commercial banks, and settlement platforms. Today, it is one of the largest global alliances on CBDCs and tokenized assets. It stressed the integration of several CBDCs to decrease the possibility of payment system fragmentation.

The trial demonstrated CBDCs’ capability to facilitate sophisticated trade and foreign exchange payments. It also looked at the concept of automation, which aims to improve speed and reduce transaction costs. The participants were pleased with the trial’s outcome. They verified that banks could incorporate CBDCs into their existing infrastructure. This milestone gives SWIFT a clear timeline for its integration efforts.

SWIFT recognizes the rapid growth of financial innovations, including tokenization and shared ledger models, and aims to connect CBDCs with banking through the messaging layer. The firm recognizes the value of shared infrastructure, which includes real-time balance updates for all ledger participants. However, SWIFT agrees that shared ledgers cannot handle enormous volumes of data.

SWIFT advises using the messaging layer to solve these challenges. The layer will address transactional and data-intensive requirements for modern financial services. This includes adhering to anti-money laundering (AML) and sanctions screening guidelines. The group aims to create an environment that allows CBDCs to be seamlessly integrated into the existing financial system by combining SWIFT’s powerful messaging services with the unique capabilities of distributed ledger technologies.

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