The President of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in China has discussed the difficulties and potential solutions to the problem of interoperability between CBDCs issued by different countries.
In an interview with 21st Century Business Herald, Wen Yang discussed the CBDC’s efforts to overcome technical gaps and the spread of CBDC systems caused by various countries’ technology trajectories and standards.
Nearly 70% of central banks anticipate issuing CBDCs during the next decade, and more than 130 economies are now investigating them, as stated in the research. Nevertheless, “data silos” may form as a result of the fast growth, rendering systems incommunicative with one another.
The “fragmentation” problem and the resulting “data silos” are the result of “now, there are considerable differences in the technical routes and standards, including protocols, throughout economies,” according to Yang.
Yang said that eleven nations had completed the launch of their CBDCs, with others still in the planning phases.
While the European Central Bank is getting ready to launch a digital Euro, China’s digital yuan has already found its way into a number of apps. Every single day, commercial banks in India process one million digital rupee transactions nationwide.
In July 2023, Swift initiated the second stage of its CBDC sandbox, which aims to address intricate use cases related to digital assets, digital commerce, and foreign exchange networks for CBDC settlements and payments.
Yang said that 38 global financial organizations, including regulators, commercial banks, and market infrastructures, worked together for six months on a project that used seven distinct CBDCs.
When it comes to using CBDCs across borders, Yang again stressed the need of interoperability. The outcomes of the sandbox validated SWIFT’s plan to streamline digital transactions while letting banks keep using their current systems.
According to Yang, “Tests on the interface between digital trade platforms and CBDC networks utilizing Distributed Ledger Technology (DLT) and smart contracts have shown theoretically possible for automating trade payments.”
In order to evaluate more extended use cases in a complete environment, he noted that Swift aims to enhance its CBDC connection solution. To meet the increasing needs of the market, this would include improving the infrastructure for on-chain foreign exchange settlements and international payments.
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