SWIFT celebrates ‘major milestone’ to streamline cross-border transfers

Financial messaging system FAST claims to have “solved” the challenge of interoperability in cross-border transactions in a “major step towards unlocking the potential of the digital future”.

SWIFT says its experiments have shown that central banks’ digital currencies (CBDCs) and tokenized assets can move seamlessly on existing financial infrastructure.

In partnership with CapgeminiSWIFT achieved CBDC-to-CBDC transactions between different distributed ledger technology (DLT) networks based on Quorum and Corda technologies, as well as fiat-to-CBDC flows between these networks and a real-time gross settlement system.

According to SWIFT, this means that as CBDCs and tokens are developed, they can be rapidly distributed at scale to facilitate trade and investment between more than 200 countries and territories around the world.

While in a separate experiment with Citi, Clearstream, Northern Trust and SETL, SWIFT demonstrated that the infrastructure can act as an interconnection between several tokenization platforms and different types of cash payment. SWIFT explored 70 scenarios that simulated market issuances and secondary market transfers of tokenized bonds, stocks and cash.

Experimental success

Tom Zschachinnovation manager at FAST, said: “We see inclusion and interoperability as key pillars of the financial ecosystem, and our innovation is a big step towards unlocking the potential of the digital future. For CBDCs, our solution will enable central banks to easily and directly connect their own networks to all other payment systems in the world through a single gateway, ensuring the immediate and smooth flow of payments across national borders.

“Tokenization has great potential to enhance liquidity in markets and increase access to investment opportunities, and SWIFT’s existing infrastructure can ensure that these benefits can be realized as early as possible, by as many people as possible.”

SWIFT, which connects more than 11,500 financial institutions and four billion accounts across 200 countries and territories, says the experiments are part of its comprehensive innovation agenda to enable instant, frictionless and interoperable cross-border transactions.

Next step

To Andrew Edemhead of innovation at fintech unicorn PPROwhile the potential to streamline cross-border transfers with instant transfer of value between institutions would potentially be a huge improvement over the existing correspondent banking system, to become truly utilitarian for payments, crypto will need to interoperate with the existing financial system infrastructure.

Edem says: “It is worth noting that in its tests SWIFT has not actually transferred value using real CDBCs, but has instead tested technology proposed for CDBCs – which have not yet been formally adopted as far as we know.

“It is also important to understand that in this context we are referring to ‘wholesale’ CDBCs, which will only be transferred between credit institutions, rather than retail CDBCs, which will be held by consumers in wallets.”