BIS Creates ‘Game-Changing’ Blueprint For Future Financial System
A new study from the Bank for International Settlements says that a new type of financial infrastructure that combines tokenized money and assets on a programmable platform could change the global financial system in a big way.
In a special part of the BIS Annual Economic Report 2023, the pillars of the current monetary system are rethought in order to create a plan for the future. A unified ledger would combine tokenized forms of central bank digital currency (CBDC) with tokenized bank deposits and other tokenized claims. This would open a new era in the growth of the monetary system and the economy as a whole.
Hyun Song Shin, economic adviser and head of research of the BIS, comments: “We are at the cusp of another major leap in the monetary and financial system, which will have far-reaching consequences for the economy and society at large. Bringing together central bank money, commercial money, and different assets on the same platform, all tokenised and interacting, opens up a whole new range of possibilities. This would be a game-changer in how we think about money and how transactions take place.”
The study gives some examples of possible new ideas, such as:
There are new ways to settle securities that combine all the steps into one smooth deal.
Tokenized payments that have regulatory checks built in and settle in wholesale CBDC at the same time.
Credit that is made possible by smart contracts and lowers the cost of trade finance for smaller businesses, making global supply lines better.
Using technology that protects privacy, there should be more sharing of information about people who might want to borrow money. This would give more people who are struggling access to loans.
Says Song Shin: “The benefits would be limited only by the ingenuity of the public and private partners who innovate on the platform. The gains are not just incremental improvements. They address in a more fundamental way the incentive and informational problems that have stood in the way of better economic arrangements.”
