BIS Unveils Tokenization Project in 2024 Agenda

In a recent announcement, the Bank for International Settlements (BIS) Innovation Hub revealed its 2024 work program, featuring six projects. Among them, the blockchain-based tokenization initiative, named Project Promissa, stands out as a collaborative effort involving the BIS, the Swiss National Bank, and the World Bank.

Project Promissa: Tokenizing Promissory Notes

Project Promissa aims to create a proof-of-concept platform for digital tokenized promissory notes. The collaboration plans to leverage distributed ledger technology for simplified management and enhanced transparency. Cecilia Skingsley, Head of BIS Innovation Hub, emphasized the importance of tokenization, stating that it's a significant area where multiple initiatives are in the pipeline.

Revolutionizing Financial Instruments

Promissory notes, representing a form of debt, are traditional financial instruments. Most of them are still paper-based, contributing to the existing complexities in the financial system. BIS intends to use distributed ledger technology to streamline their management and boost transparency, with the proof-of-concept scheduled for completion by early 2025.

Retail CBDC Privacy Project Advances in Hong Kong

BIS Innovation Hub's Hong Kong Centre is pushing forward with Project Aurum, focusing on the privacy of payments in retail Central Bank Digital Currencies (CBDCs). The project, conducted jointly with the Hong Kong Monetary Authority (HKMA), seeks to advance central banks' understanding of privacy in CBDC system designs.

Project Aurum: Exploring Interbank Systems

Aurum, a full-stack CBDC system, encompasses both a wholesale interbank system and a retail e-wallet system. The project, involving the BIS and HKMA, aims to research and develop two distinct types of tokens within the interbank system—an intermediated CBDC and a stablecoin backed by CBDCs.

A Step Towards Financial Innovation

As BIS ventures into the world of tokenization and privacy-focused CBDC projects, the financial landscape could see significant advancements. However, challenges remain, especially in transforming traditional financial instruments like promissory notes into digital tokens. The outcome of these initiatives could shape the future of financial systems, with the BIS Innovation Hub playing a pivotal role.

While these projects offer potential for financial innovation, the transformation from traditional to digital systems poses challenges that will require careful navigation.