Swift unveils progress on MNBC integration

Swift, the world's leading provider of secure financial messaging services, has announced the progress of tests to integrate MNBCs into cross-border transactions. These tests, carried out with 38 partners from various countries, have identified new use cases in sectors such as e-commerce, foreign exchange transactions, etc. The stakes surrounding the solution are high, as it should, according to Swift, ensure compatibility in exchanges between different currencies and financial systems.

FACTS

• Swift recently reported on its work to integrate central bank digital currencies (CBDCs) into its financial system.

• The tests are being carried out in collaboration with 38 different institutions, including central banks, commercial banks and market infrastructures. These players come from Australia, France, Germany, Singapore, Taiwan and elsewhere.

• These tests verified several points:

• Swift's connection solution would enable financial institutions to carry out a variety of transactions using MNBCs and other electronic tokens.

• Integration into business practices should be straightforward.

• The MNBC connector, based on Swift's API, could simplify and accelerate trade flows and enable efficient foreign exchange settlement, while preserving financial institutions' existing infrastructures.

• In previous tests, Swift had already succeeded in facilitating cross-border transfers and connecting MNBCs across multiple networks, as well as with fiat currencies.

CHALLENGES

• Keeping pace with currency developments: As more and more central banks turn their attention to the subject of digital currencies, Swift must find solutions to make these currencies usable in the same way as those currently in circulation. Within the next two years, the international company is expected to launch a new platform connecting MNBCs to the current financial system.

• Avoiding fragmentation: Swift's role is also to limit as far as possible the fragmentation caused by the disparity of technologies and protocols in the creation of central bank electronic currencies. The aim is to be able to settle in digital currencies even if they have been created using different technologies. Thanks to this testing work, banks will be able to continue making payments with existing currencies or MNBCs.

• Facing up to the competition: Today, SWIFT has to face up to cheaper alternatives whose operations enable international settlements. These include players such as Ripple. If it succeeds in launching its platform, the international company could retain its leadership and become the benchmark player in the processing of central bank digital currencies.

MARKET PERSPECTIVE

• The participants are already talking about a number of cases in which this system could be beneficial. In e-commerce, for example, it could automate trade flows and make them available virtually around the clock. Participants also spoke of the potential for cost reduction.

• Swift continues to improve its cross-border credit transfer system through partnerships. In October 2023, for example, Swift announced a partnership with Wise, with the aim of enhancing this service with new functionalities without impacting its use for financial institutions.