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SWIFT achieves interoperability between its current infrastructure and digital assets

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(Kitco News) - The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has announced that it has successfully been able to move Central Bank Digital Currencies (CBDCs) and tokenized assets on the existing financial infrastructure – which the agency called “a major milestone towards enabling their smooth integration into the international financial ecosystem.”

According to the press release from SWIFT, the member-owned cooperative conducted two separate experiments that bridged assets between different distributed ledger technology (DLT) networks and existing payment systems, which allowed “digital currencies and assets to flow smoothly alongside, and interact with, their traditional counterparts.”

“This important step forward builds on SWIFT’s core capabilities and means that as CBDCs and tokens develop, they can be rapidly deployed at scale to facilitate trade and investment between more than 200 countries and territories around the world,” SWIFT said. 

One experiment was conducted in collaboration with Capgemini and was able to achieve CBDC-to-CBDC transactions between different DLT networks utilizing Quorum and Corda technologies. They also managed to conduct fiat-to-CBDC flows between these networks and a real-time gross settlement system. 

“The success showed that the blockchain networks could be interlinked for cross-border payments through a single gateway, and that SWIFT’s new transaction management capabilities could orchestrate all inter-network communication,” the press release said. 

There are now 14 central and commercial banks collaborating in a testing environment to facilitate full-scale deployment of the interoperability solution. Participants include Banque de France, the Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo.

A second experiment was conducted in collaboration with Citi, Clearstream, Northern Trust, and SETL – SWIFTs technology partner – which explored 70 scenarios simulating market issuance and secondary market transfers of tokenized bonds, equities and cash.

The tests showed that the system successfully functioned as a single access point to different tokenized networks and demonstrated that its infrastructure could be used to create, transfer and redeem tokens and update balances between multiple client wallets. 

It also showed that it could provide interoperability between different tokenization platforms and existing account-based infrastructure. 

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In response to the successful experiments, Tom Zschach, chief innovation officer at SWIFT, said, “Digital currencies and tokens have huge potential to shape how we will pay and invest in the future. But that potential can only be unleashed if the different approaches that are being explored have the ability to connect and work together.”

Zschach went on to emphasize the importance of establishing inclusivity and interoperability as central pillars of the financial ecosystem, saying that these latest innovations represent a “significant step towards unlocking the potential of the digital future.” 

“Tokenization has great potential when it comes to strengthening liquidity in markets and increasing access to investment opportunities, and SWIFT’s existing infrastructure can ensure these benefits can be realized at the earliest opportunity, by as many people as possible,” Zschach said. 

The SWIFT system currently connects more than 11,500 financial institutions and four billion accounts across 200 countries and territories and plays a fundamental role in facilitating international transactions. 

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