Interoperability was a key focus during Tuesday’s CBDC discussion at Sibos, with the panel exploring how to facilitate the operation of these emerging digital currencies on a cross-border scale.
Swift is currently collaborating with central banks and financial institutions to conduct beta tests of a novel approach for linking CBDCs with existing fiat infrastructures. Nick Kerigan from Swift emphasized that interoperability needs to be prioritized early in the development of CBDCs to prevent challenges similar to those encountered with national payment systems.
David Ballaschk from the Deutsche Bundesbank and Hariram Chakraborthy Janakiraman from ANZ acknowledged that a standardized CBDC is unlikely, and that achieving interoperability is the most feasible goal. Initiatives like Swift’s sandbox play a crucial role in this, offering a global platform for collaboration. Janakiraman highlighted the necessity for the industry to focus on use cases rather than getting bogged down by the complexities of connecting various blockchains and tokens.
Adeline Bachellerie from Banque de France pointed out that central banks need to collaborate with all ecosystem participants, including Swift and fintechs, to prevent fragmentation within the system.
In a separate session on embedded finance, Amit Agarwal from Citi shared insights on how the bank is adapting to the emergence of platforms. He noted that in China, vast platforms contain numerous small sellers catering to buyers worldwide. Citi aims to facilitate this process by offering collection services, digital payment acceptance, payout solutions, and foreign exchange assistance.
To illustrate evolving client needs, Agarwal mentioned a ride-hailing company that is a Citi client, highlighting how drivers now expect immediate access to their earnings 24/7 rather than awaiting a weekly payout. Furthermore, he reported significant growth for platform clients, noting that one company that previously processed a few thousand payments daily has surged to 8.5 million.
The rapid rise of platforms also introduces regulatory challenges for banks like Citi. The risk profile becomes significantly higher when dealing with these platforms, as banks engage directly with both buyers and sellers who are not formal clients.