Financial messaging system SWIFT has laid out its blueprint for a global central bank digital currency (CBDC) network following an 8-month experiment on different technologies and currencies, according to Reuters.
The trial, which involved France and Germany‘s national central banks as well as global lenders like HSBC, Standard Chartered and UBS, looked at how CBDCs could be used internationally and even converted into fiat money if needed.
Around 90% of the world’s central banks are now using, trialling or looking into CBDCs. Most don’t want to be left behind by bitcoin and other cryptocurrencies, but are grappling with technological complexities.
SWIFT’s head of innovation Nick Kerigan said its trial, which will be followed by more advanced testing over the next year, resembled a bicycle wheel where 14 central and commercial banks in total connected spoke-like into its main hub.
The idea is that once scaled-up, banks may need only one main global connection, rather than thousands if they were to set up connections with each counterpart individually.
“We believe that the number of connections needed is much fewer,” Kerigan said. “Therefore, you are likely to have fewer breaks (in the chain) and you are likely to achieve greater efficiency.”
Some countries such as the Bahamas and Nigeria already have CBDC’s up and running. China is well advanced with real-life trials of an e-yuan, while central bank umbrella group, the Bank for International Settlements, has also been running cross-border trials.
SWIFT’s main advantage though is that its existing network is already usable in over 200 countries and connects more than 11,500 banks and funds.