Dive Brief:

• The major U.S. bank company Citigroup and the Belgium payment messaging firm Swift said last week that they successfully completed a trial that settled payment transactions between fiat and digital currencies.
• The trial proved that interoperability is possible between traditional financial systems and the distributed ledgers that move cryptocurrencies, the companies said Friday in a short news release.
• “These trials with Swift represent a significant leap forward in understanding and developing infrastructure required to support digital currency transactions,” Ayesa Latif, head of foreign exchange products at Citi, said in the release.

Dive Insight:

The trial by the bank and the international company, also known as the Society for Worldwide Interbank Financial Telecommunication, faced a number of challenges, according to the release. Transactions between the digital wallets that store cryptocurrencies, for example, are instantaneous and irreversible, whereas transactions between banks are not. 

Citi and Swift used an escrow mechanism to help manage risk and a central orchestrator to help manage the exchange, according to the release. The two organizations are refining messaging and operational standards for transactions using digital assets. 

Spokespeople for Citi and Swift did not immediately respond to requests for more details about the trial. 

The trial used USDC stablecoins from the cryptocurrency platforms Circle Internet Group and moved those assets on a test network for digital transactions. Circle did not immediately respond to a Wednesday request comment.

Stablecoins have been widely considered by payments players as a way to improve cross-border transactions, which are technically complex and pricey due partly to numerous players being involved. Digital currency transactions hold out the promise of potentially making such transactions simpler and less expensive.