SWIFT adds Hong Kong and Kazakhstan national banks to CBDC interoperability beta experiment

09/13/2023 23:10:46 GMT | By Aaryamann Shrivastava

SWIFT will be initiating a test with Hong Kong, Kazakhstan and another unnamed central bank for CBDC interoperability.
Additionally, a second phase of sandbox testing for exploring additional use cases is initiated with 30 global financial institutions.
The experiment comes days after G20 nations announced the Crypto Asset Reporting Framework (CARF).

The Society for Worldwide Interbank Financial Telecommunications, better known as SWIFT, is moving forward with its Central Bank Digital Currency (CBDC) tests. The digital fiat has been the focus of many countries, as have fund transfer facilitators such as SWIFT. With this experiment, if successful, CBDCs could potentially be fast-tracked globally into becoming a mode of fund transfer.

SWIFT takes on CBDCs

In an announcement on September 13, the money messaging system stated that it would soon be initiating its next CBDC experiment. SWIFT noted that the beta test would be enrolling three central banks - the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan, as well as a third unnamed bank. Through this, SWIFT would test its innovative solution for interlinking CBDCs.

This test, if successful, would forge paths for interoperability, which refers to the ease of exchange of information and data among various systems. In the case of digital currencies, interoperability would allow for the transfer of CBDCs of one country to another’s through SWIFT, minimizing friction.

In addition to this experiment, SWIFT is also initiating the second phase of its sandbox testing. In this testing, commercial banks, central banks and financial market infrastructures are set to explore additional use cases of CBDCs. At the moment, about 30 leading global financial institutions, including the likes of The Reserve Bank of Australia, Deutsche Bundesbank, HKMA, and Bank of Thailand, will be participating, marking a 66% increase from the first sandbox testing participation.

The CBDC beta testing is the second major international money transfer experiment taken up this year. Earlier in July, the New York Federal Reserve completed its regulated liability network experiment. The experiment, which took place in partnership with Citi, SWIFT and other financial institutions, would be the New York Fed’s solution to instantaneous international settlement of transactions.

Distributed Ledger Technology (DLT), the underlying tech behind cryptocurrencies, is the basis of this experiment.

Cryptocurrencies, on the other hand, are also finding global acceptance, with 20 of the world’s largest economies joining hands in establishing standardized regulation. During the G20 summit this week, nations including the US, UK, India, and China, among others, announced the Crypto Asset Reporting Framework (CARF), which would come into effect by 2027.

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