The Bank for International Settlements (BIS) has revealed its ambitious 2024 strategy, placing a significant emphasis on central bank digital currencies (CBDCs) and tokenization. The BIS Innovation Hub has announced a comprehensive program comprising six new projects focused on cybersecurity, financial crime, CBDCs, and green finance.

One of the key initiatives includes the launch of Project Promissa, a collaborative effort involving BIS, the Swiss National Bank, and the World Bank, which aims to digitize promissory notes using blockchain technology. The project seeks to revolutionize traditional financial instruments by enhancing transparency and simplifying management.

Additionally, the BIS is advancing CBDC privacy in retail payments with Project Aurum, conducted jointly with the Hong Kong Monetary Authority (HKMA). The project explores the privacy aspects of retail payments using CBDCs, building on the success of previous prototypes.

Furthermore, the BIS has introduced four other initiatives – Project Leap, Project Symbiosis, Project Hertha, and Project NGFS Data Directory 2.0 – addressing cybersecurity, green finance, and financial crime, reaffirming its commitment to shaping the future of financial technology.

Project Promissa: Transforming Financial Instruments with Tokenization

Project Promissa, a collaborative effort involving BIS, the Swiss National Bank, and the World Bank, aims to revolutionize the handling of promissory notes by digitizing them, aligning with the BIS’s commitment to exploring innovative solutions in the realm of tokenization. The initiative is anticipated to conclude its proof-of-concept phase by early 2025.

Project Aurum: Advancing CBDC Privacy in Retail Payments

Building on the success of its wholesale interbank system and retail CBDC prototype in 2022, Project Aurum, conducted jointly by BIS and the Hong Kong Monetary Authority (HKMA), progresses into its next phase. The project explores the privacy aspects of retail payments using CBDCs, aligning with the broader BIS strategy to highlight the pivotal role of CBDCs in the evolving landscape of digital currencies.

BIS’ Additional Initiatives

Apart from focusing on tokenization and CBDCs, BIS has introduced four other initiatives – Project Leap, Project Symbiosis, Project Hertha, and Project NGFS Data Directory 2.0 – addressing cybersecurity, green finance, and financial crime.

These projects underscore BIS’s commitment to a multifaceted approach to shaping the future of financial technology, reinforcing its dedication to innovation, automation, and experimentation across diverse aspects of the financial industry.

Frequently Asked Questions

What are CBDCs?

CBDCs, or central bank digital currencies, are a type of digital currency issued by a central bank and recognized as legal tender. Unlike cryptocurrencies, CBDCs are centralized and regulated by the issuing authority.

What is tokenization in finance?

Tokenization in finance refers to the process of converting rights to an asset into a digital token on a blockchain. This allows for the representation of assets such as real estate, artwork, or financial instruments in a digital format, facilitating trade, ownership, and management.

How does blockchain technology enhance financial transparency?

Blockchain technology enhances financial transparency by providing a decentralized and immutable ledger of transactions. This means that once a transaction is recorded on the blockchain, it cannot be altered or deleted, ensuring transparency and accountability in financial activities.

What impact do CBDCs have on the financial industry?

CBDCs have the potential to transform the financial industry by offering a secure and efficient means of payment, reducing transaction costs, and improving financial inclusion. They also provide central banks with greater visibility into monetary transactions and the ability to implement monetary policy more effectively.