In India, commercial banks are processing one million digital rupee transactions daily. This surge in digital currency usage reflects a broader global trend towards central bank digital currencies (CBDCs). In an interview with the 21st Century Business Herald, Web Yang, President of SWIFT China, discussed the challenges and potential solutions for achieving interoperability among cross-border CBDCs.
The Challenge of Fragmentation
Yang emphasized that different economies are adopting various technological approaches and standards for CBDCs. This diversity has led to fragmentation, creating the risk of isolated “data silos.” Yang stated, “Currently, there are significant differences in the technological paths and standards, including protocols, among economies, which presents a ‘fragmentation’ challenge and leads to ‘data silos’.”
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Global Adoption and Development
To date, 11 countries have fully launched their CBDCs, while many others are in the later stages of development. Yang noted that over 130 economies are exploring CBDCs, with nearly 70% of central banks planning to issue them within the next decade. However, the rapid pace of development raises concerns about these systems’ ability to communicate with each other.
China’s digital yuan is already integrated into various applications, while the European Central Bank is working on a digital Euro. In India, the high volume of digital rupee transactions highlights the country’s significant progress in digital currency adoption.
SWIFT’s Role in Enhancing Interoperability
To address the challenges of fragmentation and improve interoperability, SWIFT plans to broaden its CBDC connector solution. Yang mentioned that this expansion would include testing more extensive use cases in a comprehensive environment. This effort aims to enhance support for on-chain forex settlements and cross-border payments, meeting the growing demands of the market.
By improving interoperability among CBDCs, SWIFT aims to facilitate smoother and more efficient cross-border transactions, reducing the risk of data silos and ensuring that different CBDC systems can communicate effectively.
The rapid adoption of CBDCs worldwide, including the high transaction volumes seen in India, underscores the importance of addressing technological fragmentation. As more countries develop and implement their digital currencies, solutions like SWIFT’s CBDC connector will play a crucial role in ensuring seamless cross-border transactions and fostering global financial integration.
