International Monetary Fund and Multiple Central Banks Launch “Project Agorá” Initiative to Explore Tokenization of Cross-Border Payments

International Monetary Fund and Multiple Central Banks Launch "Project Agorá" Initiative to Explore Tokenization of Cross-Border Payments

International Monetary Fund and Multiple Central Banks Launch "Project Agorá" Initiative to Explore Tokenization of Cross-Border Payments

The Bank for International Settlements (BIS) and seven central banks announced on Wednesday a project called “Project Agorá” that aims to explore how tokenization can enhance the functioning of the monetary system in collaboration with the private sector. This project brings together the central banks of France, Japan, South Korea, Mexico, Switzerland, the United Kingdom, and the Federal Reserve Bank of New York, who will seek to collaborate with a group of private financial companies convened by the International Institute of Finance (IIF).

Based on the concept of a unified ledger proposed by the BIS, this project will research how to seamlessly integrate tokenized commercial bank deposits and tokenized wholesale central bank currencies within a public-private programmable core financial platform. This could enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability, while maintaining its two-tier structure.

The collaboration aims to overcome some structural inefficiencies existing in today’s payment methods, particularly cross-border payments. These issues present a range of challenges, including different legal, regulatory, and technical requirements, operating hours and time zones, as well as increased complexity in conducting financial integrity controls such as anti-money laundering and customer verification. Currently, these control measures often need to be repeated multiple times for the same transaction, depending on the number of intermediaries involved.

Cecilia Skingsley, Head of the BIS Innovation Hub, stated:

“Project Agorá represents a unique opportunity to explore how tokenization can contribute to a more efficient and resilient monetary system. By collaborating with central banks and private financial companies, we aim to address the challenges faced in cross-border payments and unlock the potential of programmable money.”

Hyun Song Shin, Economic Adviser and Head of Research at the BIS, added:

“The integration of tokenized assets within a unified ledger has the potential to revolutionize the way we transact and interact with financial markets. This project will provide valuable insights into the possibilities and implications of such integration.”

Additionally, the BIS plans to issue letters of intent to private financial institutions to participate in Project Agorá.