SWIFT sets out blueprint for central bank digital currency network (updated)
05/10/2022 15:28
(Adds detail, graphic of CBDC adoption around the world)
By Marc Jones
LONDON, Oct 5 (Reuters) - 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.
The trial, which for the last month has involved both 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."
CBDCs are being seen as a step forward as they could
effectively be programmed to meet both governments' and
individuals' specific needs, although they have also raised
concerns about privacy and surveillance.
SWIFT's trial also tested different underlying CBDC
technologies known as Distributed Ledger Technologies. The use
of various technologies has also been raised as a potential
hurdle for rapid global adoption.
There was a separate trial too carried out with Citi,
clearing house Clearstream and Northern Trust on 'tokenised'
assets - traditional assets like stocks and bonds transformed
into digital tokens that can then be issued and traded in
real-time.
Some countries such as the Bahamas and Nigeria already have
CBDCs 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.
The Belgium-based firm has gone from being virtually unknown
outside banking circles to a household name this year after it
cut most of Russia's banks off from its network as part of the
West's sanctions for the country's invasion of Ukraine.
Kerigan said that kind of move could also happen in a new
CBDC system, but doubted whether it would stop countries joining
one.
"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."
"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."
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Central Bank Digital Currencies around the world https://tmsnrt.rs/3M9mcEL
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(Additional reporting by Tom Wilson Editing by Ana Nicolaci da
Costa and Mark Potter)
((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters
Messaging: marc.jones.thomsonreuters.com@reuters.net Twitter
@marcjonesrtrs))