BIS and 7 central banks embark on Project Agora to delve into asset tokenization.

The Bank for International Settlements (BIS) has partnered with the central banks of France, Japan, South Korea, Mexico, Switzerland, the United Kingdom, and the United States Federal Reserve Banks to delve into the concept of asset tokenization within the monetary system, in conjunction with private financial institutions. The joint initiative, known as “Project Agora,” will expand upon BIS’s proposal for a unified ledger that connects tokenized commercial bank deposits and tokenized wholesale central bank money. BIS stated that this could enhance the functioning of the monetary system and offer new solutions through the use of smart contracts and programmability while maintaining its two-tier structure. BIS will release specific instructions and requirements at a later date, allowing private banks a grace period to join the partnership. Hyun Song Shin, BIS’ economic adviser and head of research, explained that tokenization combines the record-keeping function of a traditional database with the rules and logic governing transfers within a central bank framework. Additionally, Cecilia Skingsley, head of BIS Innovation Hub, emphasized the importance of establishing a “common payment infrastructure” that enables interoperability across digital currencies for payment systems, accounting ledgers, and data registries. BIS has shown a significant interest in recent crypto innovations related to financial centralization. On January 23, the BIS Innovation Hub announced the addition of six new projects focusing on cybersecurity, combating financial crime, central bank digital currencies (CBDCs), and green finance. Another area of exploration for BIS is Project Promise, a collaboration between BIS, the Swiss National Bank, and the World Bank, which aims to develop a proof-of-concept platform for tokenized promissory notes.