BIS and central banks collaborate with private sector for tokenisation project

The Bank for International Settlements (BIS) and seven central banks have announced their intention to collaborate with the private sector to explore the potential of tokenisation in improving the functionality of the monetary system. This collaboration, named Project Agorá, involves the central banks of Bank of France, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and the Federal Reserve Bank of New York, along with several private financial firms convened by the Institute of International Finance (IIF).

Project Agorá aims to investigate the integration of tokenised commercial bank deposits and tokenised wholesale central bank money using smart contracts and programmability. The goal is to enhance the functioning of the monetary system while maintaining its two-tier structure. By leveraging smart contracts, new settlement methods and types of transactions that are not currently practical or viable can be enabled.

This public-private partnership recognizes the challenges in cross-border payments, including varying legal, regulatory, and technical requirements, operating hours, and time zones. Project Agorá seeks to overcome these inefficiencies by streamlining processes and automating financial integrity controls, which are often duplicated for the same transaction depending on the number of intermediaries involved.

The BIS Innovation Hub will lead Project Agorá and work towards delivering public goods to the global central banking community. The BIS will issue a call for expressions of interest to private financial institutions, with the IIF acting as the intermediary. Their aim is to involve regulated financial institutions representing each of the seven currencies involved.