SWIFT enrolls 3 central banks in CBDC interoperability beta test, expands sandbox

The bank messaging network has seen a dramatic increase in processing speed and is developing technology to connect CBDCs.

Three central banks have joined the beta phase of bank messaging platform SWIFT’s central bank digital currency (CBDC) interoperability project, the company announced Sept. 13. It has also entered a new phase of sandbox testing, it said.

The Hong Kong Monetary Authority, the Central Bank of Kazakhstan and an unnamed central bank have integrated their infrastructure with SWIFT’s “CBDC connector solution” for direct testing, the company said.

The first phase of sandbox testing began in March with a lineup of over 18 participants, including Royal Bank of Canada, Banque de France, Société Générale, BNP Paribas, Monetary Authority of Singapore, HSBC, Deutsche Bundesbank and NatWest. The sandbox had over 5,000 transactions in the course of 12 weeks. Now, the number of participants will top 30.

Today’s #Fintech Digest includes SWIFT beta testing interlinking #CBDC with existing fiat infrastructures, and Telegram integrating The Open Network (TON) based self-custodial crypto wallet into its 800 million active user messaging platform. https://t.co/37R1YAVtMC pic.twitter.com/HkaxqEzPKF

— John Kiff (@Kiffmeister) September 13, 2023

SWIFT has created several projects involving CBDCs, including a wholesale CBDC project in conjunction with the New York Federal Reserve Bank using a regulated liability network.

Related: SWIFT says blockchain integration ‘more plausible’ than unifying CBDCs

SWIFT messaging connects over 11,500 financial institutions worldwide. It has an uncomfortable relationship with CBDCs because the new technology could compete with it in many circumstances. The various CBDC bridging projects supported by the Bank for International Settlements are examples of this potential. Competition breeds innovation, though.

SWIFT announced in August that 89% of the transactions it accommodates are processed within an hour, surpassing the G20’s goal of 75% one-hour settlements by 2027. Moreover, 84% of transactions on the network “are conducted directly or with a single intermediary.” However, it noted that, in practice, only 60% of wholesale payments are concluded in an hour due to regulatory controls, working hours and batch processing.

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