Swift, the Society for Worldwide Interbank Financial Telecommunication, is a cross-border transaction mechanism that is in constant advancement, responding deftly to the dynamics of a more digitalised and networked global economy. This institution has effortlessly integrated technological advances into its existing infrastructures, and experiments with digital currencies and tokenised assets together with central banks and technology leaders around the world.

Swift continues to be a critical enabler of cross-border transactions. As the world’s central banks explore and experiment with their own digital currencies, tokenised assets, and stablecoins to create new, safe, immutable and programmable mediums of value exchange, Swift is collaborating with the industry to integrate necessary technologies to trial new initiatives as they arise.

It is open to accommodating various digital currencies. Kevin Wong, Swift’s CEO for Asia Pacific, stated: “We’re more or less indifferent [to the shifts].” Wong would go on to stress Swift’s ‘agnostic’ stance on the dynamic space it navigates.

The current environment has limited access to cross-border settlement in several currencies, and this creates settlement concerns. Many limited currencies cannot be used for cross-border settlements, and major currencies must be used instead. Currency swings and international business exposure put rising economies at risk. Certain groups, such as BRICS members, are considering trading more in their local currencies, which might be eased by central bank digital currencies (CBDC).

Swift remains agnostic, adaptable

Wong noted that these issues are not uncommon, and that in the light of the current global climate, specific blocks may indeed rise. Swift retains its neutral posture. Wong said: “As far as Swift is concerned, we’ve always been platform-agnostic. We’ve always been currency-independent. It’s up to individual players or communities to agree on a currency of choice for trading, settlement, and clearing, and we’ll continue to support accordingly.”

Swift’s objective to simplify data for fast processing across multiple platforms is highlighted by its adoption of ISO 20022 standards. It is investigating the prospects of distributed ledger technologies (DLT) and decentralised finance structures as blockchain technology gains acceptance.

ABCs of CBDC integration

Wong emphasised reusability and practicality as major reasons for implementing CBDC and tokenised assets into its current infrastructure rather than developing new networks. The strategy entails assessing what works effectively and what needs to be improved in order to minimise costs.

Acting as a network across more than 200 countries and billions of accounts adds up to valuable experience. While technological proof of concept can be proven, real-world difficulties, such as changing capital controls, anti-money laundering, and know-your-customer practices, call for careful attention. Based on its 50 years of industry know-how, Swift proposes altering specific parts of infrastructure and processes rather than reinventing the wheel.

Its approach is based on collaboration, as seen in its partnership with the Bank for International Settlements (BIS) on Project Nexus. The goal of Project Nexus is to integrate domestic instant payment systems in order to improve cross-border transactions, potentially revolutionising the speed and cost-effectiveness of international payments.

Swift works on many projects with central banks and commercial banks, encouraging them to join in experiments. It intends to collect a variety of perspectives, feedback, and experiences from these entities as it tests and experiments with CBDC-related concepts, particularly in cross-border payments. According to Wong, the objective is to connect these numerous efforts, acting as a bridge to gather insights, and learning from multiple ventures. He emphasised the importance of this partnership, noting: “We’ve had a lot of dialogue and a lot of workshops to ensure standardisation.”

The trials begin with a preliminary study designed to engage the community. If certain assumptions are correct, central banks, commercial banks, and other stakeholders will be involved in more extensive experimentation. Swift launched a sandbox environment at the end of 2022 to provide a safe environment for participants to experiment with various roles and scenarios. Wong reiterated Swift’s impartial attitude on platforms and currencies, including CBDC.

He stressed the significance of merging technical features and governance while maintaining security and resilience, which aligns with Swift’s basic values, saying: “To me, CBDC is just another form of currency. We ensure that we can bring all of these pieces together from a technical standpoint, and also from the governance and security resiliency that people connect with Swift.

“I also believe that the various options have been very well combined. We’ve also been extremely active on the tokenisation front, conducting a number of tests in that area.”

When BIS proposed a unified ledger to bring together a global CBDC system, Wong commented that while this sounded promising in theory, different economies and governments will likely adopt these technologies at different rates, motivated by their own agendas. He acknowledged that attaining uniformity from the start would be difficult, but expressed hope that some level of uniformity could be reached eventually.

Improved cross-border transactions

Swift’s initiatives, such as Swift GPI and Swift Go, demonstrate the company’s dedication to efficient cross-border payments. Wong emphasised that the goal is to lower total community costs by ensuring that financial institutions and consumers benefit from smooth, secure, and speedy cross-border transactions. Global Payment Innovation (GPI) is a collaborative effort between Swift and the global financial community that sets a new benchmark for handling international payments. Swift GPI redefines the payment experience by meeting the industry’s demands for speed, traceability, and clarity. It enables banks to provide their customers with a streamlined payment procedure made possible by user-friendly digital technologies. Swift GPI builds on Swift’s current infrastructure and messaging system to offer features and functions that improve the payment process.

Swift Go, on the other hand, builds on Swift GPI’s capabilities by capitalising on its established speed, security, and predictability. It arose as a response to the problems of long payment delays and unexpected deductions that have plagued cross-border transactions.

Supporting inclusive finance

The procedure of transmitting cross-border payments will become more efficient for both individual consumers and small-to-medium-sized organisations. Swift Go takes advantage of Swift’s worldwide reach to link consumers across a range of major currencies.

Swift’s objective to balance the scales with inclusivity places it in a significant position in the growth of the world’s monetary systems in an era defined by shifting economic supremacy. It has had discussions with regulators, central banks, commercial banks, and numerous associations around the Asia Pacific to convey its currency-agnostic stance.

Some currencies have gained significance throughout time as a result of their reliability and utility in transactions, which is a natural market evolution. The majority of settlements are in dollars, but Wong believes that the proportion of settlement currencies will shift over time. Swift allows for settlement in several currencies, therefore the specific currencies involved becoming prominent have no impact from Swift’s standpoint.

Wong emphasised the importance of governance across several areas—Asia, Pacific, Middle East, Europe, Americas, and Latin America—when considering the evolution of Swift’s governance. Swift’s cooperative character as a member-owned organisation underscores the significance of strong governance.

The institution isn’t owned by anyone. Instead, its stockholders represent 3,500 member organisations in a member-owned cooperative. The G10 central banks, the European Central Bank, and the National Bank of Belgium manage the system in Belgium. Swift was founded in 1973 and launched in 1977 with 518 institutions from 22 countries using its communications services.

The governance model is notable for its emphasis on the board of directors. This board represents a wide range of economies, countries, and markets. There are clear and unambiguous rules in place: communities that achieve particular collective volume percentages get Swift board representation. Wong said: “We continue to champion things that are actually for the benefit of the community, not just necessarily the members themselves.”

Its significance as a bridge between economies and currencies reinforces its place in the growth of global monetary systems. Wong believes Swift’s legacy as a uniting force in global banking is stronger than ever.