The Bank for International Settlements (BIS) has proposed a new type of market infrastructure in the form of a unified electronic ledger that could enhance the global financial system, according to a Tuesday report. This ledger would combine central bank digital currencies (CBDCs), tokenized money, and assets on one platform, with the help of automated smart contracts. BIS Economic Adviser and Head of Research Hyun Song Shin said, “Bringing together central bank money, commercial money, and different assets on the same platform, all tokenized and interacting, opens up a whole new range of possibilities.”
The current monetary system is not seamless due to third-party messaging systems such as SWIFT, which can cause delays and uncertainty. A unified ledger would eliminate these issues and provide new methods for securities settlement, tokenized deposits with built-in regulatory checks, and reduce the cost of trade finance for smaller companies. The BIS’s proposed system may exceed in scope a similar platform envisioned by the International Monetary Fund (IMF) for CBDCs.
Tobias Adrian, director of the IMF’s monetary and capital markets department, said a global CBDC platform could be more efficient and safer than traditional platforms. Shin added, “We are at the cusp of another major leap in the monetary and financial system, which will have far-reaching consequences for the economy and society at large. This would be a game-changer in how we think about money and how transactions take place.”
However, a unified ledger for cross-border payments would require significant policy harmonization across jurisdictions. Shin said the institution is not thinking of using a permissionless blockchain, though the mechanism used for effecting the transaction can be decentralized. The next step would be for a group of central banks to come together to take the project forward under a public policy mandate with the help of the private sector.