SWIFT TO LAUNCH NEW CBDC CONNECTOR IN 1-2 YEARS, 38 INSTITUTIONS PARTICIPATE
SWIFT readies itself for a CBDC future, even if some CBDCs will avoid it.
SWIFT sees CBDC as the future and will launch its CBDC transfer platform in 1-2 years, showing how predictions of SWIFT’s demise at the hands of CBDCs are premature!
Nick Kerigan, SWIFT's head of innovation, stated, "We are looking at a roadmap to productize (launch as a product) in the next 12-24 months. It's moving out of experimental stage towards something that is becoming a reality."
So, if you think CBDCs are failing, are a passing fad, offer no advantages, or won’t come to pass, it’s time to reconsider.
This doesn’t mean SWIFT will have it easy despite enlisting 38 institutions in its trial. The Global South, including BRICS and others, is not fond of SWIFT’s sanction enforcement and may look to the BIS’s mBridge, which launches in Hong Kong this year, as an alternative.
What you shouldn’t miss with this announcement is that SWIFT is making a bold statement about our CBDC future!
👉TAKEAWAYS
SWIFT trialed four use cases, three were successful:
Use case 1: Trade payments
Automate complex trigger-based payments for trade across multiple different CBDC networks.
Use case 2: Foreign exchange
Achieve interoperability with existing market infrastructures to leverage established processes using CLS settlement, and facilitate atomic PvP in an industry marketplace.
Use case 3: Delivery-versus-Payment (DvP)
Facilitate atomic DvP by interlinking multiple asset and cash networks.
Use case 4: Liquidity Saving Mechanism (LSM)
Here, the trial was unsuccessful as bank liquidity is rationed due to risk management and other concerns, not solely because of technical limitations.
Summary of the Swift connector capabilities per use case
👊STRAIGHT TALK👊
SWIFT’s centrality in money transfer is uncontested, and it is innovating its way into a future where it can maintain this centrality in a new CBDC era.
While SWIFT may appear to hold all the cards, CBDCs usher in a new era, and they will have real competition through the soon-to-launch mBridge in Hong Kong constructed by the BIS, Hong Kong Monetary Authority, and a growing list of other central banks, including China’s.
While it is logical to assume that SWIFT will maintain market dominance, it will have to work hard to win over Global South nations who consider SWIFT an extension of US dollar dominance and an enforcer of US sanctions.
Once again, I emphasize that we need to see cash transfers, whether small transfers in mobile apps or large transfers on SWIFT, in the context of the geopolitical forces increasingly dividing our world. Pitting SWIFT and mBridge’s services against one another is just a manifestation of this division.
This is unequivocally good news for all. While acknowledging that cash transfers will be fractured along geopolitical lines, CBDC transfers, whether used on SWIFT or mBridge, will be more economical and faster for all.
It will also mean that banks will finally have competition in cash transfer services, which should bring additional efficiency in pricing, convenience, and, yes, sanctions avoidance for some.
I congratulate SWIFT for seeing the future and making a bold move to support the inevitable rise of CBDC.
We all deserve a better deal!
Thoughts?
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