SWIFT, the global bank messaging network, has revealed that it will build a new platform. This portal targets connecting the growing central bank digital currencies (CBDCs) with the current financial system. The move is a major milestone for the growing CBDC ecosystem, utilizing SWIFT’s central position in the world of banking. The move is in line with the launch schedule of major CBDCs.

In the present environment, almost 90% of the central banks worldwide are looking at digital editions of their currencies. Driven by the rise of Bitcoin (BTC) and other cryptocurrencies, they aim to lead in the financial innovation race. Nonetheless, these organizations are confronted with technological complexities. The SWIFT project seeks to remove these obstacles by making the various CBDCs interoperable despite the differences in the underlying technologies.

Global Banks Test CBDCs in Major SWIFT Trial

The head of innovation of SWIFT, Nick Kerigan, revealed a recent trial that had been running for six months. The trial was a partnership of 38 entities, including central banks, commercial banks, and settlement platforms. It is one of the biggest global alliances on CBDCs and tokenized assets up to now. It emphasized the unifying operation of different CBDCs so that the risk of payment system fragmentation would be reduced.

The trial revealed the capabilities of CBDCs in the facilitation of sophisticated payments related to trade and foreign exchange. It also examined the notion of automation, improving speed and cutting transaction costs. The participants greatly recognized the success of the trial. They verified that banks could include CBDCs using their current infrastructure. This milestone gives SWIFT a very set timetable to move forward with its integration efforts.

Bridging CBDCs with Banking Through the Messaging Layer

SWIFT, in particular, has recognized the fast pace of development of financial technologies, especially in tokenization and the emerging shared ledger models. The organization appreciates the effectiveness of shared infrastructure, which includes real-time balance updates to all ledger participants. However, SWIFT also acknowledges the incapacity of shared ledgers in processing large amounts of data.

The solution to these problems that SWIFT recommends is the messaging layer. The layer will provide transactional and data-intensive requirements for contemporary financial services. This encompasses adherence to standards of anti-money laundering (AML) and sanctions screening. Uniting the strong messaging services of SWIFT with the innovative capacity of distributed ledger technology, the organization seeks to design an environment for the smooth integration of CBDCs into the existing banking system.

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The post SWIFT Aims to Unify CBDCs with Traditional Banking appeared first on CoinGape.

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