For the important role that the SWIFT network has played thus far in keeping global financial integrity, it is confident in being able to develop a functional system that will make CBDCs a globally liquid legal tender as it is currently doing for fiat.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT), a messaging network that fosters functional communication amongst banks has unveiled its blueprint for a Central Bank Digital Currency (CBDC) network. As reported by the Euronews network, the released blueprint followed the 8-month-long trial that was carried out by the SWIFT Network involving a slew of both central and commercial banks.
According to the report, the trial featured as many as 14 different participants including the Central Banks of France and Germany as well as private sector players including HSBC Holdings plc (NYSE: HSBC), UBS Group AG (SWX: UBSG), and Standard Chartered PLC (LON: STAN). The trails explored models in which CBDCs could be used internationally and avenues by which they can be converted to fiat notes if need be.
A major highlight of the trial is that once CBDCs go mainstream, connecting institutions will only need to depend on a major central entity rather than numerous focal partners.
“We believe that the number of connections needed is much fewer,” said Nick Kerigan, SWIFT‘s head of innovation, “Therefore, you are likely to have fewer breaks (in the chain) and you are likely to achieve greater efficiency.”
With the SWIFT model/template, Central Banks that have floated their CBDC will be able to hinge their interconnectivity using one central connection. The SWIFT network argued that this will be an easier role to assume considering the fact that its system is currently used in about 200 countries and by more than 11,500 banks.
For the important role that the SWIFT network has played thus far in keeping global financial integrity, it is confident in being able to develop a functional system that will make CBDCs a globally liquid legal tender as it is currently doing for fiat.
SWIFT Network and the Dangers of Censorship
While the prospects of serving as a central connection for CBDC-linked transactions are positive, there are also visible dangers that are presented as a likely move toward censorship.
SWIFT was a financial messaging tool that was known only in banking circles earlier this year, however, the company’s public outlook changed when it banned Russian banks from using its system when the country invaded Ukraine earlier in February.
The censorship is a scare and this may want to make central banks to refuse to join the network for their CBDC operations.
“Ultimately what most central banks are looking to do is to provide us with a CBDC for the people, the businesses, and the organisations in their jurisdiction,” Kerrigan said trying to allay such fears. “So a solution that’s fast and efficient and that gains access to as many other countries as possible would seem to be an attractive one.”
Today, the majority of central banks are trialing a CBDC but only the Bahamas and Nigeria have launched functional e-currencies in circulation.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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