Swift, all the digital maneuvers against China
Swift, the global financial messaging standard, is working on a network of central bank digital currencies. Here are details and objectives (also anti-Chinese)
SWIFT, the company that manages the financial messaging system that has set itself as an international standard, yesterday defined its plan to create a global network of central bank digital currencies (also known as CBDC, or Central Bank Digital Currency ), after a trial period lasted eight months.
THE EXPERIMENTATION OF SWIFT
The experiment – which in the last month has involved the central banks of France and Germany and various credit institutions such as HSBC, UBS and Standard Chartered – has evaluated the possibilities of international use of central bank digital currencies, which could also come converted into fiat money , that is , into unconvertible paper money.
CENTRAL BANKS AND DIGITAL CURRENCIES
It is estimated that around 90 percent of global central banks are currently using, experimenting or considering introducing digital currencies to respond to the spread of cryptocurrencies (Bitcoin, for example).
A BICYCLE WHEEL
SWIFT's head of innovation, Nick Kerigan, explained that the trial – which will follow more advanced tests next year – resembles the wheel of a bicycle, with fourteen central and commercial banks radiating out to its main hub. .
The basic idea is that banks can only need one main global connection, and not thousands of single connections that would compromise the efficiency of the infrastructure.
USERS 'RESERVES
The Reuters news agency explains that central bank digital currencies could be structured in such a way as to meet the needs of both governments and individuals, even though the latter have often expressed reservations about privacy and surveillance issues.
DIFFERENT TECHNOLOGIES
During the test, SWIFT tested several technologies for digital currencies, known as Distributed Ledger Technologies . The use of different technologies, however, is considered an obstacle to the global adoption of CBDCs, which would happen more quickly in the presence of a shared standard.
GEOPOLITICS OF DIGITAL CURRENCIES
Some countries, such as Nigeria, already have operational central bank digital currencies. China is also ahead on this issue and is proceeding with real trials of the digital yuan (e-yuan), including for cross-border transactions.
However, SWIFT has an advantage: it is a network that already exists, which is used in more than two hundred countries and which connects over 11,500 banks and funds.
SWIFT's project for central bank digital currencies therefore also has geopolitical importance because it aims to maintain the global importance of the system in financial payments, hindering competition from the Chinese digital yuan.
Moreover, Beijing already has its own network for cross-border payments in yuan with Chinese entities: it is called CIPS, or Cross-Border Interbank Payment System . The system, launched in 2015, is used by 1,280 financial institutions in 103 countries and the CIPS is estimated to handle transactions worth $ 50 billion per day (compared to SWIFT's 400 billion).
CIPS VS SWIFT
CIPS is still largely dependent on SWIFT for cross-border financial messaging, but it may have its own direct line of communication and become autonomous. For Chinese banks and companies, CIPS is useful for transacting away from US monitoring.
At present, CIPS is not an alternative to SWIFT. First, because the yuan does not have the status of a global currency like the dollar, and therefore international banks do not feel the urgency of using an alternative network aimed at Chinese entities outside the country. And then because the use of CIPS does not exclude that of SWIFT, which is necessary for the completion of transactions.
– Read also: Who could unseat the dollar as a global reserve currency?
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/swift-rete-valute-digitali-banche-centrali/ on Thu, 06 Oct 2022 08:47:36 +0000.