The Bank for International Settlements (BIS) to Enhance Digital Currency Research
The BIS Innovation Hub has announced its plans to enhance digital currency research and tokenization in 2024. The program will focus on central bank digital currencies (CBDCs), cybersecurity, financial crime prevention, and green finance. One of the key initiatives is Project Aurum, which will explore the privacy of retail payments using CBDCs.
In 2022, the Hong Kong Monetary Authority (HKMA) successfully developed a wholesale interbank system and a retail CBDC prototype. This progress has paved the way for further advancements in CBDC technology.
Tokenization in Financial Systems
Cecilia Skingsley, head of the BIS Innovation Hub, highlights the importance of tokenization in financial systems. Project Promissa, a collaboration with the Swiss National Bank and the World Bank, aims to digitize traditional financial instruments like promissory notes. By leveraging blockchain technology, this project seeks to streamline management and enhance transparency.
In addition to Project Promissa, BIS will continue working on other key projects such as Project Mandala, Project Pyxtrail, and Project Cambridge. These initiatives focus on automating cross-border payment compliance, monitoring stablecoin balance sheets, and experimenting with multi-CBDC platforms.
New Projects by BIS Innovation Hub
The BIS Innovation Hub has also planned to launch six new projects. These include Project Leap for protecting payment systems against quantum computing threats, Project Symbiosis for using artificial intelligence and big data in supply chain emissions disclosures, and Project NGFS Data Directory 2.0 for enhancing accessibility to climate-related data. Additionally, Project Hertha will explore financial crime patterns in payment systems.
Technical Priorities for CBDC Architecture
Under the BIS’s leadership, central banks across the Americas have been outlining technical priorities for CBDC architecture. The Consultative Group on Innovation and the Digital Economy (CGIDE) recently provided a comprehensive reference for nations researching or implementing CBDCs. The collaboration aims to develop a CBDC proof of concept that prioritizes interoperability, scalability, user-centric design, security, and data privacy.
Balancing Privacy and Transparency in CBDC Transactions
Project Tourbillon, led by the BIS Innovation Hub, has made significant progress in achieving a balance between privacy and transparency in CBDC transactions. The final report from Project Tourbillon proposes a system that enables payments without compromising personal information. This demonstrates the BIS’s commitment to developing CBDC technology with a strong focus on user privacy.
Hot Take: BIS Innovation Hub Advances Digital Currency Research
The Bank for International Settlements (BIS) is taking significant strides in digital currency research through its Innovation Hub. With a range of projects focused on central bank digital currencies, cybersecurity, financial crime prevention, and green finance, the BIS is driving innovation in the financial sector. These initiatives aim to enhance efficiency, transparency, and privacy in financial systems while exploring new possibilities offered by blockchain technology and tokenization. By collaborating with other central banks and organizations worldwide, the BIS is leading the way towards the development of robust and user-centric digital currencies. As digital currencies continue to gain prominence in global economies, the BIS Innovation Hub’s efforts will play a crucial role in shaping their future.
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