In a statement released on Thursday, interbank messaging company SWIFT has announced that its project to interconnect central bank digital currencies (CBDCs) has shown “clear potential and value” and will be moving on to a second phase.
The project, which involves leading banks such as BNP Paribas, Intesa San Paolo, and Standard Chartered, as well as the central banks of France and Singapore, aims to address the risk of fragmentation in CBDC adoption.
Interest in CBDCs is on the rise, with several countries having already issued digital versions of their national currencies. However, the proliferation of different technologies and standards poses a risk of fragmentation.
The SWIFT project aims to create a framework that enables interoperability between CBDCs issued by different central banks.
The second phase of the project will explore further applications such as trade finance and securities settlement. SWIFT also plans to move on to beta testing in the coming months, with a view to enabling faster, cheaper, and more secure cross-border payments.
According to Lewis Sun, Global Head of Domestic and Emerging Payments at HSBC, the SWIFT project could help to prevent fragmentation and enable greater cooperation between central banks.
“While interest in CBDCs is growing, so is the risk of fragmentation as a widening range of technologies and standards is being experimented with,” Sun said in a statement. “This project has the potential to lead to faster, cheaper and more secure cross-border payments.”
The project has been welcomed by international organizations such as the International Monetary Fund and Bank for International Settlements, which have called for greater cooperation between central banks on CBDCs.
With more countries exploring the possibility of issuing their own digital currencies, the need for interoperability and standardization is becoming increasingly urgent.