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The Society for Worldwide Interbank Financial Telecommunication (SWIFT) China President, Wen Yang, recently discussed challenges and solutions for cross-border central bank digital currency (CBDC) interoperability. There are over 130 economies exploring CBDCs, with nearly 70% of central banks expecting to issue them in the next decade. However, there are differences in technological paths and standards among economies leading to fragmentation and potential data silos. Currently, 11 countries have fully launched their CBDCs, while others are in later stages of development. China’s digital yuan has been implemented across various applications, the European Central Bank is preparing for a digital Euro, and India’s commercial banks handle one million digital rupee transactions daily.

Swift launched the second phase of its CBDC sandbox in July 2023, focusing on complex use cases in digital trade, digital assets, and foreign exchange networks for CBDC payments and settlements. The project involved 38 financial institutions worldwide, including regulators, commercial banks, and market infrastructures, testing interactions with seven different CBDCs. The results emphasized the importance of interoperability for cross-border CBDC use. Swift plans to expand its CBDC connector solution to test more extensive use cases, including enhancing support for on-chain forex settlements and cross-border payments to meet growing market demands.

Wen Yang highlighted the organization’s effort to bridge technical gaps and simplify digital transactions while allowing financial institutions to continue utilizing their existing infrastructures. The sandbox results demonstrated the technical feasibility of automating trade payments through interaction between digital trade platforms and CBDC networks using Distributed Ledger Technology (DLT) and smart contracts. Swift plans to expand its CBDC connector solution to test more extensive use cases in a comprehensive environment, including on-chain forex settlements and cross-border payments. This initiative aims to address market demands for seamless cross-border CBDC transactions.

The rapid development of CBDCs could lead to potential data silos where systems are unable to communicate with each other due to differences in technological paths and standards. Yang emphasized the importance of interoperability in cross-border CBDC use and highlighted Swift’s efforts to simplify digital transactions for financial institutions. Swift’s CBDC sandbox in the second phase focused on complex use cases in digital trade, digital assets, and foreign exchange networks for CBDC payments and settlements, involving 38 financial institutions worldwide. The results confirmed the technical feasibility of automating trade payments through DLT and smart contracts. Swift plans to expand its CBDC connector solution to test more extensive use cases, including on-chain forex settlements and cross-border payments, to meet growing market demands.

China’s digital yuan has seen implementation across various applications, while the European Central Bank is preparing for a digital Euro and India’s commercial banks handle one million digital rupee transactions daily. Eleven countries have fully launched their CBDCs, and others are in later stages of development. Swift’s CBDC sandbox project involved testing interactions with seven different CBDCs, emphasizing the need for interoperability in cross-border CBDC use. Swift plans to expand its CBDC connector solution to test more use cases, including enhancing support for on-chain forex settlements and cross-border payments. This initiative aims to address growing market demands for seamless cross-border CBDC transactions and to bridge technical gaps in CBDC systems.

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