The Bank for International Settlements (BIS) introduced the concept of a unified ledger in its annual economic report last year. Now, together with seven central banks, it is diving deeper into the proposal with Project Agorá, which will explore the integration of wholesale central bank digital currencies (wCBDCs) with tokenised commercial bank deposits in a public-private programmable core financial platform.
According to BIS in a press release, this approach could “enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability, while maintaining its two-tier structure”. Smart contracts could “enable new ways of settlement and unlock types of transactions that are not viable or practical today”.
The project will aim to overcome structural inefficiencies in cross-border payments, potentially addressing the additional challenges that come with this sector due to differing legal, regulatory, and technical requirements, as well as operating hours and time zones. BIS also names the “increased complexity” of financial integrity controls, which are often repeated even in the same transaction, as an area of focus.
More efficiency
Currently, “numerous payment systems, accounting ledgers, and data registries require other complex systems to integrate them,” says head of BIS Innovation Hub Cecilia Skingsley. Project Agorá wants to “explore a new common payment infrastructure that could bring all these elements together and might make the system work more efficiently together on a digital core financial infrastructure”. Beyond testing just the technology, the project will also “test it within the specific operational, regulatory and legal conditions of the participating currencies, together with financial companies operating in them”.
The seven participating central banks are Bank of France representing the Eurosystem, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England (BoE), and the Federal Reserve Bank of New York. They will be working in partnership with a large group of private financial firms brought together by the Institute of International Finance (IIF).