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SWIFT Completes Second Phase of CBDC Testing with Smart Contract and Atomic Settlement Capability


SWIFT said on March 25 that it had discovered several applications for its central bank digital currency (CBDC) solution after a successful six-month test.

The company did not create its own CBDC, but instead developed an interconnection solution for existing CBDCs – dubbed the SWIFT Connector.

The company wrote:

“At the heart of our solution are the DLT layer and smart contracts, which maintain consistent records of transactions. »

SWIFT broadly described the platform as having applications in digital commerce, securities and foreign trade. He also noted that future versions of the platform could be expanded to areas beyond CBDCs, such as bank-led tokenized custodial networks.

Smart contracts for TradFi

Specific use cases include trade payments, foreign exchange, delivery versus payment (DvP), and liquidity saving mechanisms.

SWIFT said its sandbox solution involves multiple digital ledger technology (DLT) networks. The company used Hyperledger Besu for the tokenization platform. He used R3 Corda and Hyperledger Fabric for buyer and seller networks and settlement instructions.

SWIFT also outlined atomic settlements and swaps, a blockchain-based or DLT-based settlement approach involving the instantaneous and simultaneous exchange of two assets. This type of settlement is similar to delivery versus payment (DVP) in traditional financial networks.

The platform also used smart contracts to automatically ensure that payments were executed once conditions were met. The four main use cases for SWIFT involved the use of smart contracts.

The biggest test of its kind

SWIFT said its sandbox test involved 38 institutions over six months and called it “one of the largest CBDC experiments known to date” in this regard.

He added that in terms of network activity, over 125 sandbox users made over 750 transactions during the process. Approximately 60 representatives from participating financial institutions participated in 20 collaborative working group meetings to discuss use cases.

The company plans to develop a production roadmap for the SWIFT connector, but noted that progress will depend on “market evolution and readiness.”

The service could meet the growing interest in CBDCs around the world. Countries with active CBDCs include China, Bahamas, Jamaica and Nigeria. At least 130 other countries and regions are also exploring CBDCs, with recent developments in Europe, the Philippines and Spain.

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