The Belgian global messaging network for financial transitions, SWIFT, is collaborating with a French tech major, combining efforts for the cross-border transmission of CBDC payments. The network’s 2nd CBDC project will also attempt to link traditional denomination networks with central bank digital currency(CBDC) networks, initially as a proof of concept.
The Worldwide SWIFT Network
An acronym for the Society for Worldwide Interbank Financial Telecommunication, the SWIFT was established in the 1970s and is used by banks around the world for transaction settlement. The network connects over 11 thousand financial institutions in more than 200 nations. The banking service completed 42 million messages each day in the previous year, though transaction processing may take several days. However, rising competition from faster blockchain-based payment transfer systems and potential difficulties in CBDC incorporation has built an unprecedented challenge for SWIFT in maintaining its global relevance.
Cross-Border CBDC RTGS
The explosive growth of global crypto adoption has challenged the existing hegemony of central banks around the world. Bitcoin, in the words of Microsoft founder Bill Gates, is a “technological tour de force”, gaining legal status across several nations, and rising up to be a potential challenge to the USD’s worldwide supremacy. Other cryptos like ETH and XRP have also made a significant impact, and crypto’s underlying blockchain technology has provided quicker, cheaper, and more secure alternatives to traditional payment processes with real-time visibility across cross-borders, making them perfect tools for corporate payment and remittance.
The fear of losing control has prompted central banks across the globe to accelerate the individual development of CBDCs. This in turn creates a new challenge, the challenge of interlinking the newly developed CBDCs from separate nations. SWIFT had previously been successful in completing an international transaction between a CBDC and a Real-Time Gross Settlement i.e RTGS network.
Linking CBDC Networks
SWIFT Chief Innovation Officer Thomas Zschach states, “ Facilitating interoperability and interlinking between CBDCs being developed around the world will be critical if we are able to fully realize their potential.”
Latest reports indicate the ongoing development of a gateway that facilitates national CBDC networks in the interception, translations, and transmission of messages to the global SWIFT platform for processing. The gateway will incorporate current SWIFT standards and protocols including authentication and infrastructure. ‘
Growing Adoption of Blockchain Payment Processors
The SWIFT payment processing network is noticing competition from blockchain, particularly in nations with poor banking infrastructure. A growing number of expatriates working outside are turning towards blockchain-powered remittance options to transfer hard-earned savings back to their near ones, bypassing intermediaries and subsequent remittance charges. While Bitcoin has already surpassed PayPal in global payment processing in the previous year, market leaders VISA and MasterCard have already evolved and adopted Bitcoin and other notable cryptocurrencies. A significant portion of global banks, including JP Morgan Chase, Bank of America, Goldman Sachs and Morgan Stanley already accept crypto.
VISA acknowledged over $2.5 billion worth of crypto-linked card transactions within Q1, 2022. Meanwhile, MasterCard CEO Michael Miebach went further, attending the Global Blockchain Business Council(GBBC) and expressing that SWIFT will be replaced by Blockchain within the upcoming 5 years.
Rapid technological progress and the growing blockchain adoption have triggered the premiere cross-border bank messaging service, SWIFT, into a state of evolution. The Belgian organization is collaborating with global tech and consulting giants to keep itself in pace with the upcoming futuristic innovations, linking CBDC networks within their fiat-based platform.