The Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging network has unveiled the findings from the second phase of sandbox testing for its interlinking solution for central bank digital currencies (CBDCs), known as the connector.
According to the report released by SWIFT on the test results, the project explored four use cases, not all of which were focused on CBDCs. One of the use cases involved experimenting with digital trading and instant settlement using smart contracts. Another use case involved connecting tokenization platforms to enable atomic delivery versus payment. Additionally, SWIFT collaborated with financial infrastructure firm CLS Group to demonstrate the connector’s capability to connect existing foreign exchange infrastructures using CBDCs.
The fourth use case was described as a “paper exercise” accompanied by bilateral discussions, and it involved using SWIFT’s Liquidity Saving Mechanism algorithms to reduce fragmentation of liquidity across platforms.
To showcase the connector’s interoperability, the project utilized R3’s Corda, Hyperledger Fabric, and Besu blockchains. SWIFT emphasized that traditional financial solutions will continue to exist and require interconnectivity.
Following the completion of the sandbox experiments, SWIFT plans to further develop the beta version of the connector. This development will focus on implementing smart contracts across networks, securely transferring tokens across networks using cryptographic measures, and preserving data and programmability of tokens across networks.
Over 125 participants conducted more than 750 simulated transactions to demonstrate various complex use cases for the SWIFT CBDC interlinking solution. Among the participants in the second phase of the sandbox were ANZ, Citibank, Deutsche Bank, DTCC, HSBC, Société Générale, Standard Chartered, Sumitomo Mitsui, Shanghai Commercial & Savings Bank, as well as at least seven central banks or monetary authorities.
The initial announcement of the testing phase was made in September. The first testing phase was concluded in March 2023.
SWIFT is actively exploring future use cases and has been simultaneously conducting experiments with settlement using a unified ledger model. Similar to the CBDC sandbox, this research highlights the potential of utilizing existing technology, including SWIFT’s own solutions.
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