BIS Proposes 'Finternet' Vision with Unified Ledger Technology
Summary:
In the latest advocacy for unified ledger technology, the Bank for International Settlements (BIS), through a paper co-authored by BIS head Agustin Carstens, envisions a future financial system called the Finternet. The BIS claims that unified ledgers could enhance speed, compliance, and privacy in finance by merging multiple financial asset markets into one programmable platform. The implementation of multiple unified ledgers requires the tokenization of assets, particularly money, necessitating a tokenization manager for regulatory oversight. This concept, embraced by the recent Project Agora and considered by financial messaging service SWIFT and IMF's proposed XC platform, presents a transformative future for the financial system.
In the most comprehensive and persuasive case to date, the Bank for International Settlements (BIS) has advocated for unified ledger technology, with a paper co-authored by BIS leader Agustin Carstens. The paper envisions a "financial system for the future," dubbed the Finternet, hinging largely on the implementation of unified ledgers.
The BIS suggested that these unified ledgers could alleviate a multitude of existing issues in the financial sector by enhancing speed, compliance, and privacy. Essentially, unified ledgers fuse multiple financial asset markets into a singular programmable platform, marking a substantial improvement over transactions performed on other platforms.
At present, even though users may engage with sophisticated interfaces for 'digital' transactions, the movement of money and other assets often depend on proprietors of separate databases for initiating and processing transfers. Unified ledgers provide a solution by incorporating all the elements required for financial transactions, including financial assets, ownership records, governing regulations, and related information, into one place. This could address challenges related to technical norms and governance, whilst eliminating intermediary messaging systems.
Nevertheless, the BIS does not foresee a single unified ledger reigning supreme. Instead, an ecosystem of multiple unified ledgers would inter-connect and co-op with the broader financial system beyond the Finternet via dedicated apps. These unified ledgers would call for the tokenization of assets, particularly money, which would facilitate transfers through smart contracts, thereby necessitating a tokenization manager to oversee regulatory commitments.
Furthermore, the concept of a unified ledger was first introduced by Carstens in February 2023, and it featured prominently in the 2023 BIS annual report. The Project Agora, announced recently, crucially employs unified ledger technology with the joint collaboration of BIS and seven central banks. The project focuses on central bank digital currency and tokenized money transfers.
Moreover, global financial messaging service SWIFT has also considered the idea, and the International Monetary Fund's proposed XC platform shares notable similarities. The embrace of Bitcoin in Senegal demonstrates this African nation's adoption of the concept.
Published At
4/15/2024 11:45:53 PM
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