Global Central Banks and BIS Team Up to Explore Asset Tokenization in 'Project Agora'
Summary:
The Bank for International Settlements (BIS) is partnering with central banks from several countries and private financial institutions to probe into asset tokenization within the current monetary system. The collaborative initiative, named "Project Agora", aims to rectify inconsistencies in today's payment methods, especially those cross-border, and to establish a shared payment infrastructure for interoperability across digital currencies. The BIS is also participating in numerous other projects exploring areas like cybersecurity, green finance, and more.
An alliance has been formed between the Bank for International Settlements (BIS) and the central banks of France, Japan, South Korea, Mexico, Switzerland, the UK, and the US Federal Reserve to evaluate the potential for asset tokenization within the existing monetary system, in partnership with private financial organizations. The collaborative initiative, referred to as "Project Agora", will extend the BIS-proposed unified ledger model, bridging the gap between tokenized commercial bank deposits and tokenized wholesale central bank money.
The BIS has expressed that this approach might enhance the functionality of the monetary system and spawn innovative solutions via smart contracts and programmability while preserving its two-tiered structure. This large-scale collaboration of public and private entities aims to rectify a number of structural inefficiencies in current payment methods, particularly those occurring cross-border, which often encounter complexities due to varying legal, regulatory, technical requirements, operational times, and time zones.
The required instructions and conditions will be announced later, granting a transition period for private banks to join the collation. Hyun Song Shin, the BIS economic advisor and research head, highlighted that tokenization infuses traditional database's record-keeping function with rules and logic governing transfers within the central bank framework. Meanwhile, BIS Innovation Hub's head, Cecilia Skingsley discussed a shared payment infrastructure, enabling interoperability across digital currencies regarding payment systems, accounting ledgers, and data registries.
The BIS has been closely tracking recent crypto developments linked to financial centralization. On January 23, the BIS Innovation Hub included six new projects to investigate cybersecurity, combating financial crime, CBDCs, and green finance. Another exploration area is Project Promise, a collaborative effort tied with the Swiss National Bank and the World Bank to establish a tokenized promissory notes' proof-of-concept platform.
Published At
4/3/2024 7:01:21 PM
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