Project Agorá, backed by major central banks, will now move toward “real-value” testing to settle tokenized central bank money and bank deposits on blockchain rails.
What to know:
- Project Agorá, backed by the Bank for International Settlements, found that tokenizing central bank reserves and commercial bank deposits could significantly improve the speed and reliability of payments across borders.
- With major central banks like the New York Fed, Bank of England and Bank of Japan involved, members now plan to move from simulations to testing real-value transactions.
- Tokenization is gathering steam among Wall Street firms to modernize finance, bringing assets like stocks, bonds and funds onto blockchain rails.
Amajor experiment led by the Bank for International Settlements (BIS) found that tokenization could help fix some of the biggest pain points in cross-border payments, from slow settlement times to costly reconciliation between banks.
Project Agorá, a joint effort between the BIS, seven central banks and more than 40 private financial institutions, concluded that tokenized central bank reserves and commercial bank deposits could support atomic settlement across currencies and jurisdictions.
Atomic settlement refers to transactions completing on an “all-or-nothing” basis, reducing the risk that one side of a cross-border payment fails while the other succeeds.
The initiative involved the Federal Reserve Bank of New York, Bank of England, Bank of Japan, Swiss National Bank and other central banks alongside large commercial banks and financial firms.
Project Agorá participants now plan to move beyond simulations toward testing real-value transactions involving some currencies and institutions. The Bank of Canada also joined the initiative this week.
The findings landed as global banks and asset managers ramp up their own tokenization efforts. DTCC, Wall Street’s clearing house, plans to roll out its tokenized settlement infrastructure for stocks, ETFs and U.S. Treasuries, while Nasdaq and NYSE-owner Intercontinental Exchange are both developing blockchain-based systems for tokenized stocks.
A cross-border transfers can bounce between several intermediary banks before reaching its destination at present, often taking days to settle and creating operational risks along the way. Using tokenization and blockchain rails could mean fewer delays and failed payments in the global financial system, the report showed.
The BIS, often described as the “central bank for central banks,” has become increasingly active in blockchain and tokenization research as governments and financial firms rethink how money and securities move globally.
The agency, however, warned that stablecoins — digital currencies tied to fiat money issued on blockchain by private companies — could pose risks to the financial system, urging to speed up efforts to regulate the sector.
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