BIS builds out "game-changing" blueprint for the future monetary and financial system
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A novel type of financial infrastructure could radically enhance the global financial system, argues a new report by the Bank for International Settlements (BIS). It would combine tokenised money and assets on a programmable platform, expanding the universe of economic arrangements to enhance the capabilities of monetary and financial infrastructures.
The special chapter of the Annual Economic Report 2023 details a blueprint for the future by rethinking the existing pillars of the current monetary system. A unified ledger would combine tokenised forms of central bank digital currency (CBDC) with tokenised bank deposits and other tokenised claims, opening up a new era in the joint development of the monetary system and the economy.
The chapter highlights how the future monetary and financial system will improve on the old and enable the new. Examples of possible innovations include:
♦New methods for securities settlements that combine all the individual steps into one seamless transaction.
♦Tokenised deposits with built-in regulatory checks that simultaneously settle in wholesale CBDC.
♦Smart contract-enabled credit that reduces the cost of trade finance for smaller companies, improving global supply chains.
♦Enhanced sharing of data on potential borrowers, using privacy-protecting technology, to expand access to credit for disadvantaged segments of the population.
Central banks are working together, with other public authorities and the private sector to extend the possibilities offered by the monetary system and improve cross-border integration. The BIS is supporting these efforts with research and experimentation, fulfilling its role as a forum for international cooperation and innovation among central banks.
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