The International Monetary Fund (IMF), the World Bank, the Bank for International Settlements (BIS), and Switzerland’s central bank have joined forces to explore the concept of tokenization. The collaboration aims to leverage tokenization technology to streamline financial processes and enhance global economic development.
Tokenization involves converting traditional financial assets into unique digital tokens, enabling faster and more efficient transactions. The partnership includes Switzerland’s central bank, which has been at the forefront of tokenization initiatives.
The initial focus of the collaboration is to simplify paper-based processes involved in supporting poorer regions of the world. The partnership aims to tokenize the “promissory notes” used when richer countries donate to the World Bank’s funds. By digitizing these notes, the transfer of funds can be expedited, ensuring that development money reaches emerging and developing economies more quickly.
Tokenization also presents an opportunity to encode policy and regulatory requirements into a common protocol. Embedding these rules into the tokenization process aims to address challenges such as international money laundering.
The collaboration also considers the emergence of central bank digital currencies (CBDCs). As CBDCs gain traction worldwide, there is a growing need for global standards and technology compatibility to ensure seamless interoperability with existing payment systems.
In October, it was reported that the BIS, central banks, and traditional financial institutions are exploring ways to create and use tokenized bank deposits. The BIS is working with central banks on Project Mandala, which aims to automate compliance procedures for both CBDCs and tokenized deposits.
The Bank of Korea is conducting a pilot in partnership with the BIS and other banks to test the feasibility of a wholesale CBDC used in the settlement of commercial bank tokenized deposits and the programmability of those deposits.
Photo by Ryan Klaus on Unsplash
Read other stories: UBS, SBI, and DBS Pioneer World’s First Live Repurchase Transaction with Digital Bond on Public Blockchain
JPMorgan Chase and Apollo Unveil Plans for Enterprise Mainnet in MAS Project Guardian