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SWIFT China President Wen Yang on Overcoming Barriers in CBDC Systems

The President of SWIFT China recently offered perspectives on the obstacles and remedies concerning the interoperability of cross-border central bank digital currency (CBDC).

In a discussion with 21st Century Business Herald, Wen Yang acknowledged the fragmentation within CBDC systems, stemming from diverse technological approaches and standards across economies. He emphasized SWIFT’s commitment to addressing these technical disparities and fostering cohesion.

CBDCs Face Cross-Border Challenges

The report indicates that over 130 economies are presently exploring CBDCs, with nearly 70% of central banks anticipating their issuance within the next ten years. However, this rapid advancement could result in potential “data silos,” hindering inter-system communication.

Wen Yang remarked, “Currently, there are significant disparities in technological paths and standards, including protocols, among economies, posing a ‘fragmentation’ challenge and fostering ‘data silos.'”

Yang also noted, “To date, 11 countries have successfully launched their CBDCs, with others in advanced stages of development.”

China’s digital yuan has been implemented across various sectors, while the European Central Bank is gearing up for a digital Euro. In India, commercial banks handle one million digital rupee transactions daily nationwide.

Sandbox Second Phase to Explore Solutions

In July 2023, SWIFT launched the second phase of its CBDC sandbox, with a focus on intricate scenarios in digital trade, digital assets, and foreign exchange networks for CBDC payments and settlements.

Yang mentioned, “The project spanned six months and engaged 38 financial institutions globally, comprising regulators, commercial banks, and market infrastructures, encompassing applications of seven distinct CBDCs.”

Highlighting the significance of interoperability in cross-border CBDC utilization, Yang reiterated that the sandbox outcomes affirmed SWIFT’s proposition to streamline digital transactions while enabling financial institutions to leverage their existing infrastructures.

Yang stated, “Tests conducted on the integration between digital trade platforms and CBDC networks using Distributed Ledger Technology (DLT) and smart contracts have demonstrated technical feasibility in automating trade payments.”

He revealed SWIFT’s plans to broaden its CBDC connector solution to explore more extensive use cases within a comprehensive environment. This expansion would entail enhancing support for on-chain forex settlements and cross-border payments to meet escalating market demands.

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