The Bank for International Settlements has launched a new project to work on tokenisation for cross-border payments, with a unified ledger at its core.
The BIS said it will work on Project Agora with the Bank of France, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England and Federal Reserve of New York.
The Institute of International Finance has agreed to assemble a group of financial institutions to participate in the project.
In a statement, the BIS said: “The project will investigate how tokenised commercial bank deposits can be seamlessly integrated with tokenised wholesale central bank money in a public-private programmable core financial platform.”
The project will look for ways to overcome structural inefficiencies in cross-border payments, including different legal, technical and regulatory requirements, and the increased complexity of carrying out financial integrity controls.
Money laundering and customer verification checks are often repeated several times for the same transaction, depending on the number of intermediaries involved.
The Reserve Bank of Australia is still considering the introduction of tokenised central bank money in Australia. After conducting a central bank digital currency pilot last year with the Digital Finance Cooperative Research Centre, the RBA concluded that “a CBDC has the potential to support increased efficiency and resilience in some areas of the payments system, though more research is required”.
The pilot involved the use of eAUD, a general purpose CBDC issued as a liability of the Reserve Bank. It was denominated in Australian dollars and the smallest denomination was one cent. eAUD was issued as a digital token on an Ethereum-based distributed ledger platform, where the holder was able to directly control the pilot CBDC without relying on an intermediary.
The program included offline payments, tokenised foreign exchange settlements, custody, Web3 commerce, tokenised bills, corporate bond settlements, livestock auctions and automation of goods and services tax lodgement.
The RBA and CFCRC report said: “The use cases examined in the project suggested that broad access to a CBDC could support the creation of new or more efficient markets. Supply chain and business processes could also be enhanced.
“At the same time, the project raised a number of questions and revealed various legal, regulatory, technical and operational issues that warrant further consideration as part of further research on CBDC in Australia.”
There has been no follow-on activity since the report was released last August.