The Bank for International Settlements (BIS) has joined forces with the central banks of France, Japan, South Korea, Mexico, Switzerland, the United Kingdom, and the United States Federal Reserve Banks to delve into the world of asset tokenization within the monetary system, alongside private financial institutions.
This joint effort, called “Project Agora,” will expand on BIS’s proposal of a unified ledger concept that connects tokenized commercial bank deposits with tokenized wholesale central bank money. BIS stated that this development could enhance the functioning of the monetary system and present new solutions through the use of smart contracts and programmability, while still maintaining its two-tier structure.
Detailed instructions and requirements for participation in the partnership will be issued at a later date, allowing private banks a grace period to sign up. Hyun Song Shin, BIS’s economic adviser and head of research, explained that tokenization combines the record-keeping function of a traditional database with the rules and logic that govern transfers within a central bank framework.
Additionally, Cecilia Skingsley, head of BIS Innovation Hub, emphasized the importance of a “common payment infrastructure” that enables interoperability across digital currencies, allowing payment systems, accounting ledgers, and data registries to seamlessly work together.
BIS has been actively involved in exploring crypto innovations related to financial centralization. On January 23, the BIS Innovation Hub introduced six new projects that tackle issues such as cybersecurity, combating financial crime, central bank digital currencies (CBDCs), and green finance. Another area of focus for the organization is Project Promise, a collaboration between BIS, the Swiss National Bank, and the World Bank, aimed at developing a proof-of-concept platform for tokenized promissory notes.
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