Bittime - SWIFT, the world's premier interbank communications network, has just announced the results of the second phase of trials for their interlinking solution, named "connector". This connector is designed to simplify digital financial transactions, including central bank digital currencies (CBDC).
The trial involved four different scenarios. Interestingly, not all scenarios involve a CBDC. Here are some examples:
- Digital trading with instant settlement: This trial looks at how digital asset buying and selling transactions can be settled instantly using "smart contracts".
- Tokenization and payment: Connectors are tested to connect the tokenization platform with the payment system, so that the token sending and payment processes can be carried out simultaneously.
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- Connecting foreign currency infrastructure: In collaboration with CLS Group, this trial demonstrated the connector's ability to connect existing foreign currency infrastructure with a CBDC.
- Reducing liquidity fragmentation: The final trial was carried out in a simulation to explore how connectors can help reduce liquidity fragmentation, namely the spread of financial assets across different platforms.
The trial uses several popular blockchain technologies such as R3's Corda, Hyperledger Fabric, and Besu. The results show that the SWIFT connector can work well between different blockchain technologies.
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SWIFT concluded that their connector could offer several advantages, such as:
- Centralized access: Financial institutions only need to connect to one point (SWIFT connector) to be able to interact with various other financial networks.
- Save costs: With connectors, financial institutions do not need to build their own connections to each network, thereby saving costs.
- Compatibility: The connector is designed to work with existing traditional financial systems as well as new digital financial systems.
More than 125 financial institutions and central banks participated in this second phase of trials. Some of the big names involved include ANZ, Citibank, Deutsche Bank, HSBC, and Standard Chartered.
Also read: Trust Wallet Collaborates with Biconomy to Launch Web3 SWIFT Wallet
Once this pilot is complete, SWIFT will continue to develop their connector, focusing on:
- Use of "smart contracts" across networks
- Secure locking and releasing of tokens between networks
- Maintain data security and cross-network token programmability
SWIFT sees the potential of this connector for various future scenarios. They are also researching integrated ledger models to improve the efficiency of digital financial transactions.
This trial and research shows SWIFT's commitment to supporting innovation in the digital finance sector, while still utilizing existing financial infrastructure.
Get to know SWIFT more
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an organization that provides secure messaging services for international financial transactions. Before SWIFT, international fund transfers were made via Telex, which was less efficient and error-prone.
SWIFT is here to solve this problem by providing code standardization for identifying banks and describing transactions.
Global Organization
SWIFT's head office is in Belgium, with branch offices spread throughout the world, including Australia, Austria, Brazil, China, France, Germany and Indonesia.
Currently, SWIFT has around 3,500 financial institutions as shareholders. These shareholders have the right to nominate members of the board of directors based on how often they use the SWIFT network.
The six largest user countries are each represented by two directors, while the next 10 user countries are represented by one director each.
Even though members of the board of directors represent financial institutions from certain countries, in practice the national government can still exert influence through regulations applied to these financial institutions. International economic sanctions may also impact SWIFT operations.
Cost Based System
SWIFT charges a small fee for each message sent, with fees varying depending on the type of message and destination country.
For large transactions or recurring transactions, it's a good idea to find out the best way to send money overseas.
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The Future of SWIFT
By trialling new connectors for digital transactions, SWIFT is demonstrating its commitment to adapting to developments in financial technology.
The aim is to create a financial system that is faster, more efficient and safer, both for traditional financial transactions and digital transactions which are increasingly growing rapidly.
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CBDC: Safe and Practical Digital Money of the Future!
CBDC: New Digital Currency Plans in the Philippines
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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