SWIFT Advances CBDC Integration with Successful DLT Test

SWIFT has completed its second test phase for Central Bank Digital Currencies (CBDCs), focusing on digital ledger technology (DLT) and smart contracts. On March 25, it announced the end of a six-month experiment, showcasing the capability of its solution to interconnect existing CBDC networks without creating a new digital currency.

This SWIFT connector uses DLT and smart contracts to ensure accurate and consistent transaction records, with potential applications in digital trade, securities, and international trade, possibly expanding to include tokenized bank deposits in the future.

The trial highlighted specific applications in traditional finance, such as trade payments, foreign exchange, and liquidity-saving mechanisms, using multiple DLT networks like Hyperledger Besu, R3 Corda, and Hyperledger Fabric.

It introduced atomic settlements and swaps, offering an innovative, instant asset exchange method similar to the traditional financial system's delivery versus payment (DvP) process. Smart contracts were pivotal, guaranteeing the automatic execution of payments upon meeting specified conditions.

Labeled as one of the most significant CBDC trials, SWIFT's experiment involved 38 institutions over six months, with over 125 users completing more than 750 transactions. Sixty representatives from these institutions participated in discussions to refine and explore use cases.

SWIFT plans to develop a roadmap for the CBDC connector, keeping pace with market evolution and readiness. This step aligns with the surging interest in CBDCs worldwide, with several countries already operating their digital currencies and over 130 exploring the concept.

SWIFT's efforts mark a crucial move toward integrating CBDCs into the global financial network, promising enhanced transaction efficiency and security through DLT and smart contracts.