The e-CNY in China and the Sand Dollar in the Bahamas are some of the world’s well-known Central Bank Digital Currencies. Other countries are joining the bandwagon, and many central banks and financial regulators are at different stages of developing their national CBDC tenders. The previous study by SWIFT shows that 9 in 10 central banks are developing a national digital currency.
SWIFT has consequently identified the viability of creating a platform that links the CBDC ecosystems in different countries to foster a global payment system. The messaging system and interbank payments protocol is liaising with Capgemini SE, an IT services and consulting company based in France, to create a cross-border payment system for CBDCs.
The project will entail a series of trials and tests to establish the opportunities, threats, weaknesses, and strengths of a global CBDC ecosystem. The threats and weaknesses will be mitigated, while the opportunities and strengths will be leveraged.
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There is a Need to Create a Global CBDC Ecosystem
According to the Chief Innovation Officer at SWIFT, Thomas Zschach, interoperability, and linking of CBDC ecosystems are central to creating a global CBDC ecosystem.
The main challenge lies in the fact that CBDC ecosystems vary regarding protocols, standards, and technologies. This makes it hard to merge the fragmented platforms.
Nonetheless, the adoption of CBDCs is rising meteorically and SWIFT aims to be part of the financial transition by establishing a platform for linking CBDC ecosystems.
The Goal Is to Establish a Universal CBDC Protocol
SWIFT and Capgemini SE are not calling to create a universal protocol for CBDC ecosystems. Instead, the partnership is building a generic platform that will support diverse protocols to facilitate seamless global financial messaging and money transfer solutions.
SWIFT aims to use its experience in creating a standardized platform that supports international payments by linking banks and financial institutions with diverse operating protocols and technologies.
The new system being developed will have features such as reliability and scalability to respond to unforeseen events such as a surge in global trade that can overrun a traditional payment system.
What Can CBDC Users Expect
In jurisdictions where CBDCs have been unveiled, users have confirmed that the digital token offers unrivaled convenience while transacting. Payment for goods and services, as well as tax remittance, has been made easier.
The SWIFT- Capgemini SE project will deliver a CBDC network that can support CBDC-CBDC, CBDC-Fiat, and Fiat-CBDC payment solutions.
CBDCs are ideal for transactions since they do not fluctuate in value in a bear Crypto market. However, they can be inversely affected by inflation and interest rate hikes like fiat money. Proponents of these digital assets believe that they CBDCs can promote financial inclusion.