These CBDCs encompass economies that are responsible for more than 90 percent of the GDP worldwide, according to a report published by SWIFT on May 19 regarding its experiments with the Bank for International Settlements. A rising number of these central banks are in the advanced phases of their investigation of CBDC with nine nations already operating with their own digital currency, the most notable of which being Nigeria and The Bahamas. CBDCs, or “digital equivalents of actual central bank money,” are receiving a lot of attention right now, and a lot of that is focused on how they may assist accomplish domestic policy objectives. However, there is one possible blind spot: their usage across international borders. Thomas Zschach, Chief Innovation Officer at SWIFT stated:
Fragmentation with CBDC’s could lead to digital islands
Similarly, Nick Kerigan, Head of Innovation at SWIFT revealed if nothing is done to remedy it, this fragmentation might result in the formation of “digital islands” all over the world, he opined: Using a DLT-based CBDC network and a proven real-time gross settlement (RTGS) system, SWIFT proved in 2021 that it could effectively arrange a cross-border transaction between one entity and a second. This time, in conjunction with Capgemini, SWIFT is examining how it can interconnect the many domestic-based CBDC networks that are growing globally to enable cross-border payments using more smoothly and frictionless.
