2024-04-03 16:45:00
It is a project which says a lot regarding the intentions of central banks regarding digital currencies but also regarding their stage of advancement in this area. While the market for cryptocurrencies, which allow digital tokens to be instantly exchanged via blockchain, is growing, the Bank for International Settlements (BIS) wants to offer its own solution globally to regulate individual and wholesale payments. .
The BIS will therefore launch a new pilot project with seven central banks, including the American Federal Reserve and the Bank of France, to evaluate cross-border payments in digital currencies, it announced on Wednesday.
In reality, this project is the continuation of another experiment already carried out between the Banque de France and the institution based in Switzerland. But the intervention of the Fed, the bank of the world’s largest economy and the country where the gains made on crypto-assets are the highest, might give a boost to the project.
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A public-private platform
Called the “Agora Project,” the goal is to understand how digitalized commercial bank deposits can be integrated with central bank currencies on a public-private financial platform, the BIS said in a statement.
This institution, considered the central bank of central banks, seeks to determine how digitalization and smart contracts (smart contracts) can facilitate transactions that are currently unprofitable by accelerating the speed at which they are carried out and lowering their costs, while maintaining their integrity.
“We believe that tokenization is the next step in money and payments,” Cecilia Skingsley, director of the BIS innovation hub, said at a press conference.
Tokenization consists of representing money or financial assets in the form of a digital token and registering them on a platform such as a blockchain.
Accelerate on state currencies
But this time it is carrying out broader tests with this Agora project in which the American Federal Reserve, the Bank of England, the Bank of Japan, the Bank of Korea and the Bank of Mexico will also participate.
The BIS thus ensures that seven of the largest international currencies, including the dollar, the euro, the yen and the Swiss franc are represented in this project.
Central bank digital currencies (CBNCs) are already used in countries such as China, with the e-yuan to strengthen its control over the currency. Russia is also carrying out experiments in this direction.
In Europe, the digital euro project is also on track. The Banque de France was chosen to represent the euro during the tests which will be carried out around these seven major currencies.
According to the BIS, 24 central banks should have launched a digital version of their currency by 2030.
“The Agora project will spearhead the exploration of tomorrow’s monetary system for cross-border payments”declared François Villeroy de Galhau, the governor of the Bank of France, quoted in a separate press release.
Fight once morest money laundering
Cross-border payments are complex operations as they require numerous checks to combat money laundering and verify customers.
“These checks are often repeated several times for the same operation depending on the number of intermediaries involved,” stressed the Swiss National Bank in a separate press release.
Added to this are other constraints such as regulatory and technical differences from one country to another or even time zones which complicate operations.
Due to these numerous constraints, cross-border transactions are now a high-risk, low-return business for banks, explained Hyun Song Shin, economic advisor and research director of the BIS, during the conference call.
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