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SWIFT experimenting with interoperability of CBDCs and existing payment systems


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Yesterday, SWIFT announced that they are currently conducting experiments with Capgemini to examine how CBDCs and existing payment systems could be interlinked at the network level.

In particular, they will look at how this could be achieved using the SWIFT system. The experiments will involve SWIFT and Capgemini building and demonstrating the ability to deploy a gateway, which would intercept cross-border transactions on a domestic CBDC network. The gateway would then translate the transaction and send it to the SWIFT network for onward transmission – to either another CBDC network or payment system.

In a press release on its website, SWIFT said that:

This collaborative proof of concept addresses the interlinking of different CBDCs. It also reuses existing bank messaging standards and authentication models, including ISO 20022 and SWIFT’s Private Key Infrastructure. Our aim is to ensure that the solution can be accessible across SWIFT’s unique community of more than 11,000 financial institutions in over 200 countries.

The Problem of CBDC Interoperability

SWIFT and Capgemini’s latest experiment aims to address the issue of interoperability between CBDCs and existing payment systems.

Over 80% of countries are now actively exploring CBDCs, however, almost all CBDCs are being built using different technologies and platforms.

For example, some countries will use DLT, while others are using more centralized, conventional tech. There are even certain countries that may deploy a CBDC using a combination of both technologies.

As well as this, CBDCs will not necessarily replace existing payment systems – both will exist side-by-side for quite some time.

For frictionless cross-border payment to be possible, it’s imperative that CBDCs running on various technologies and existing payment systems have the ability to interoperate.

We are combining our deep expertise in payments with significant investments in several CBDC-related innovations. This collaborative effort with SWIFT aims to remove entry barriers for all participants around the globe where CBDCs coexist with traditional payment rails.

Rishabh Shah, Head of Capability Development for DeFi, Capgemini

Read more: The Components of a Functioning CBDC: XRP as the global bridge?

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