SWIFT claims to have ratified a problem for central bank digital currencies (CBDCs) transactions between different blockchains.
Kenneth Goodwin, Blockchain Intelligence Group’s director of regulatory and institutional affairs, said this shows that banks recognize the massive, costly infrastructure required to roll out digital currencies backed by countries. He believes SWIFT’s scale adds weight to its blueprint.
Goodwin said the central banks are basically saying what the governments are saying. It’s about having the right network infrastructure to execute on a digital platform that is very secure. And this is where SWIFT comes in. Goodwin says SWIFT took along with the research because of the thorny choice between incorporating CBDCs with the financial infrastructure company’s existing payment rails or competing against a crypto-native competitor such as Bitcoin’s Lightning Network which is a layer-2 payment protocol built atop Bitcoin’s core blockchain. It uses the Taro protocol for issuing assets like stablecoins and CBDCs on the blockchain. SWIFT then uses Lightning to execute transactions.
It has proved that CBDCs and tokenized assets can move seamlessly on existing financial infrastructure. SWIFT described this as a major milestone towards enabling a smooth integration into the international financial ecosystem. Its team conducted two separate experiments and established that financial currencies and assets can flow smoothly and integrate with their traditional financial counterparts on the network. Moreover, SWIFT is already being used to connect more than 11,500 banks and funds across 200 countries.