Central Bank Digital Currencies (CBDCs) and tokenised assets can “move seamlessly” on existing financial infrastructure, experiments by SWIFT have found.

The organisation carried out two experiments which it claims have solved the challenge of interoperability in cross-border transactions by bridging different distributed ledger technology (DLT) networks and existing payment systems.

This allows digital currencies to “flow smoothly” alongside traditional money, as well as interact with it, added SWIFT.

The cooperative, which connects more than 11,500 financial institutions and four billion accounts across 200 countries and territories, said the results suggest that as CBDCs and other tokens develop, they can be rapidly rolled out at scale.

SWIFT said that 14 central and commercial banks, including Banque de France, the Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo, are now collaborating in a testing environment to accelerate the full scale deployment of CBDCs.

“Digital currencies and tokens have huge potential to shape the way we will all pay and invest in the future,” said Tom Zschach, chief innovation officer, SWIFT. “But that potential can only be unleashed if the different approaches that are being explored have the ability to connect and work together.”

Zschach added: “We see inclusivity and interoperability as central pillars of the financial ecosystem, and our innovation is a major step towards unlocking the potential of the digital future. For CBDCs, our solution will enable central banks to connect their own networks simply and directly to all the other payments systems in the world through a single gateway, ensuring the instant and smooth flow of cross-border payments.”

According to SWIFT, 90 per cent of central banks are already actively exploring digital currencies.

It said that for the potential of CBDCs to be realised across borders, these assets need to "overcome inherent differences to interact with eachother" as well as with traditional fiat currency.

Working with Capgemini, SWIFT managed to achieve CBDC-to-CBDC transactions across different DLT networks, as well as fiat-to-CBDC between these networks.

The success showed that the blockchain networks could be interlinked for cross-border payments through a single gateway, and that SWIFT’s new transaction management capabilities could orchestrate "all inter-network communication".

SWIFT also collaborated with Citi, Clearstream, Northern Trust and SETL to test 70 scenarios simulating market issuance and secondary market transfers of tokenised bonds, equities and cash.

In this experiment, the organisation's infrastructure served as a single access point to a number of tokenised networks and showed it could be used to create, transfer and redeem tokens and update balances between multiple client wallets, as well as provide interoperability between different tokenisation platforms and existing account-based infrastructure.

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