The Bank for International Settlements (BIS) has presented a comprehensive argument advocating for the adoption of unified ledger technology. BIS Chief Agustin Carstens coauthored a paper that introduces the concept of a “financial system for the future” called the Finternet, which would utilize unified ledgers as a means of operation.
According to the BIS paper, unified ledgers have the potential to address several issues in the current financial system by enhancing speed, compliance, and privacy. They bring together various financial asset markets and enable them to function as executable objects on programmable platforms. This flexibility offers advantages over digital transactions conducted on other platforms.
Unified ledgers consolidate all the necessary components for completing financial transactions, including financial assets, ownership records, usage regulations, and other pertinent information, within a single venue. This feature allows them to overcome challenges related to technical standards and governance, ultimately eliminating the need for third-party messaging systems.
It is important to note that the BIS does not propose a single unified ledger. Instead, multiple unified ledgers would interact with each other and with the broader financial system beyond the Finternet through various applications. To facilitate transfers using smart contracts, unified ledgers require the tokenization of assets, particularly money. The proposal also introduces the role of a tokenization manager, responsible for monitoring regulatory requirements.
The concept of unified ledger was first introduced by Carstens in February 2023 and was further discussed in the 2023 BIS annual report. Additionally, the recently announced Project Agora, which involves central bank digital currency and tokenized money transfers, also relies heavily on unified ledger technology. The BIS and seven central banks are participating in this project.
Notably, the idea of unified ledger has also been considered by SWIFT, the global financial messaging service. Furthermore, the proposed XC platform by the International Monetary Fund shares many similarities with the concept of unified ledgers in terms of its functionality and structure.
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