The Bank for International Settlements (BIS), known as the central bank of central banks, has unveiled Project Agorá, an initiative to further explore blockchain technology to strengthen monetary systems.
Hyunsong Shin, economic advisor and head of research at BIS, highlighted the potential of tokenization, saying, “Tokenization combines the record-keeping capabilities of a traditional database with the rules and logic that governs transfers.” Project Agorá aims to leverage tokenization to improve existing features and introduce new features to the monetary system while maintaining its core principles.
The project boasts collaboration from major central banks, including the Bank of France, the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, the Bank of England, and the Federal Reserve Bank of New York. Together with a consortium of private finance companies convened by the Institute of International Finance (IIF), they will explore the seamless integration of tokenized commercial bank deposits and tokenized wholesale central bank money within a “public-private programmable core financial platform” .
The envisioned infrastructure has the potential to strengthen monetary systems and open up new possibilities through smart contracts and programmability. By overcoming structural inefficiencies, particularly in cross-border payments, the plan seeks to streamline operations and improve efficiency.
BIS Innovation Hub Director Cecilia Skingsley highlighted the project’s aim to create a common payments infrastructure that integrates different elements of the financial system to improve efficiency.
The joint effort will involve testing the technology within the operational, regulatory and legal frameworks of participating currencies with financial firms operating in those jurisdictions. The project also aims to address issues related to financial soundness controls, including anti-money laundering measures and customer verification.
Project Agorá represents the BIS Innovation Hub’s experimental approach to exploring and delivering public goods to the global central banking community. Going forward, BIS plans to invite regulated financial institutions to join the project, with multiple entities representing each of the seven participating currencies. Specific guidance and requirements for stakeholders will be provided in due course.
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