The interest in CBDCs (Central Bank Digital Currencies) has been steadily increasing, with nine out of ten of the worlds central banks now actively exploring them. According to a recent report by SWIFT detailing their trials with the Bank for International Settlements, these CBDCs include economies which account for more than 90% of global GDP. CBDC development continues A growing number of the aforementioned central banks are investigating the potential use of central bank digital currencies in a practical, real-world setting, which many have argued could be an alternative to cryptocurrencies if done correctly. Among the most noteworthy of these central banks are those of The Bahamas and Nigeria . CBDCs, or digital versions of real central bank issued fiat currencies, are attracting a lot of interest right now, with most of the development focused on how they may help achieve domestic policy goals. However, there is one potential weakness, namely the use of CBDCs on a global scale. What is SWIFT doing about it? Presently, SWIFT is investigating how it might connect the several domestic-oriented CBDC networks which are expanding internationally in order to make cross-border payments more accessible, instantaneous and efficient while adhering to the laws and regulations of each country. A particular problem that may arise regarding these digital currencies is that, if left unchecked, CBDC fragmentation might result in the formation of digital islands. Nick Kerigan , Head of Innovation at SWIFT, stated that although CBDCs could be useful, this fragmentation may result in increased isolation around the world which would seriously hamper the ability of CBDCs to compete with cryptocurrencies and as a global medium of exchange. He went on to say that different systems and CBDCs must therefore be able to operate together smoothly, otherwise companies and consumers would be unable to conduct seamless cross-border payments utilizing CBDCs and would instead choose to rely on alternatives such as cryptocurrencies. Whatever the case may be, traditional financial institutions will have to take the initiative going forward if there is to be any hope of keeping up with the burgeoning crypto and blockchain sector.
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