BIS launches Project Agorá to explore tokenization in financial systems

The Bank for International Settlements unveiled Project Agorá, an initiative to explore the potential of tokenization to enhance the efficiency of global financial systems.

The Bank for International Settlements (BIS), representing 63 central banks worldwide, spearheads numerous projects focused on issuing national digital currencies and leveraging technology to improve market operations.

Tokenization, converting real-world assets into digital tokens, has garnered increasing interest from financial institutions globally. A report endorsed by the U.K. government recently encouraged local businesses to advance their tokenization efforts.

Additionally, HSBC, a leading financial institution, announced last month its venture into tokenizing gold for investors in Hong Kong. Notably, the market value of tokenized U.S. Treasury notes on public blockchains surpassed $1 billion for the first time in March, as per data from 21.co’s Tom Wan.

Project Agorá, named after the Greek term for marketplace, will see collaboration between monetary authorities from the U.K., Japan, South Korea, Mexico, Switzerland, Europe, and the New York Fed alongside private financial firms.

The endeavor investigates how tokenized commercial bank deposits can be effectively integrated with tokenized wholesale central bank money on a public-private programmable core financial platform. According to the announcement, this integration could “enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability while maintaining its two-tier structure.”

Cecilia Skingsley, Head of the BIS Innovation Hub, emphasized the project’s focus on a more efficient payment infrastructure, potentially unifying various payment systems.

“We will not just test the technology, we will test it within the specific operational, regulatory and legal conditions of the participating currencies, together with financial companies operating in them,” Skingsley said.

Hyun Song Shin, BIS head of research, expressed optimism about the project’s ambitious goals during a press briefing.

“We’re aiming for something, which eventually will be very much usable and something which will make a real difference,” Shin said, noting the project’s foundation on the current infrastructure as a reason for this optimism.