Swift has successfully orchestrated transactions across simulated digital trade, tokenised assets, and FX networks during testing for its central bank digital currency (CBDC) interlinking solution.

The move formed part of the second phase of the banking cooperative’s industry-wide experiment – with participation from 38 institutions, including central banks, commercial banks, and market infrastructures – which tested more complex use cases than those carried out in the organisation's initial trials, including piloting CBDCs for payments.

In earlier tests, Swift was able to facilitate cross-border transfers and connect CBDCs on different networks, as well as with fiat currencies.

The organisation's experiments aim to find a way to facilitate interoperability between digital currencies and tokenised assets to overcome the potential risk of fragmentation, which can be caused by the development of digital currencies on different technologies and disparate standards or protocols.

Swift said that its latest tests show that its connector enables financial institutions to carry out a wide range of financial transactions using CBDCs and other forms of digital tokens and easily incorporate them into their business practices.

On Monday it told Reuters that it is planning to launch a new platform over the next two years which connects CBDCs that are currently in development to the existing finance system.

The phase two experiment also demonstrated that Swift's API-based CBDC connector has the potential to simplify and speed up trade flows, unlock growth in tokenised securities markets, and enable efficient FX settlement – all while allowing financial institutions to continue to make use of their existing infrastructure.

Participants in the sandbox included central banks and monetary authorities from Australia, Czechia, France, Germany, Singapore, Taiwan and Thailand, among others.

Commercial bank and market infrastructure participants included ANZ; Citibank; CLS Group; DBS; Deutsche Bank; DTCC; HSBC; Hua Nan Commercial Bank; Intesa Sanpaolo; NatWest Group; Santander; Société Générale; Standard Chartered; Sumitomo Mitsui Banking Corporation; The Shanghai Commercial & Savings Bank, Ltd; The Standard Bank of South Africa; United Overseas Bank, and Westpac Banking Corporation.

In digital trade, the collaborative experiments successfully demonstrated interoperability between different digital networks and trade platforms, with Swift’s solution facilitating atomic trade payments – payments that are completed simultaneously – alongside the transfer of assets, rather than sequentially.

Carmen Rey, head of swift and CIB Payments at Santander said that the initiative would resolve the need to have "some standardisation and common rules".

“The ability to interlink emerging and existing market infrastructures is essential to realising the potential benefits brought on by tokenisation and CBDCs," said Lewis Sun, global head of domestic and emerging payments, global payments solutions at HSBC.

Swift said that during the experiments, smart contracts and event-driven programming enabled the automation of payments only once certain conditions had been met, meaning trade flows could "potentially become automated 24 hours a day, seven days a week."

While in securities the lack of interoperability between tokenisation platforms can be a barrier to the growth, the experiments showed that the connector was able to interlink multiple asset and cash networks and could facilitate atomic delivery versus payment across those platforms.

The experiments also demonstrated that the connector was interoperable with existing market infrastructure for FX netting and settlement via CBDCs.

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