The Bank for International Settlements (BIS) has partnered 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 tokenization of assets in the monetary system, alongside private financial institutions.
Known as “Project Agora,” this initiative will expand on a unified ledger concept proposed by BIS, which aims to connect tokenized commercial bank deposits with tokenized wholesale central bank money. BIS stated that this approach has the potential to improve the functioning of the monetary system and offer new solutions utilizing smart contracts and programmability, while still maintaining its two-tier structure.
BIS will release specific instructions and requirements in the future, allowing private banks a grace period to join the partnership. Hyun Song Shin, BIS’ economic adviser and head of research, explained that tokenization merges the record-keeping capabilities of a traditional database with the rules and logic that govern transfers within a central bank framework.
Meanwhile, Cecilia Skingsley, head of BIS Innovation Hub, emphasized the importance of developing a “common payment infrastructure” that enables interoperability across digital currencies for payment systems, accounting ledgers, and data registries.
BIS has shown a strong interest in recent crypto innovations related to financial centralization. On January 23, the BIS Innovation Hub announced six new projects focusing on cybersecurity, combating financial crime, central bank digital currencies (CBDCs), and green finance. Another area of exploration is BIS’ Project Promise, a collaboration between BIS, the Swiss National Bank, and the World Bank, aimed at building a proof-of-concept platform for tokenized promissory notes.
Related: BIS and EU central banks are working on a data platform to track the flow of cryptocurrencies and decentralized finance (DeFi).