BIS Unified ledger for CBDCs and tokenized assets could improve global financial system.

A Tuesday report by the Bank for International Settlements (BIS) argues that a new type of market infrastructure in the form of a unified electronic ledger could enhance the global financial system.

The umbrella group for central banks proposed this ledger as part of its annual economic report. It could combine central bank digital currencies (CBDCs) along with tokenized money and assets on one platform. Automated smart contracts would power transactions on blockchains including Ethereum.

According to BIS Economic Adviser and Head of Research Hyun Song Shin, “Bringing together central bank money, commercial money, and different assets on the same platform, all tokenized and interacting, opens up a whole new range of possibilities.”

The report identifies that the current monetary system is not seamless and is dependent on third-party messaging systems such as SWIFT. A new unified ledger would eliminate “delays and uncertainty.”

The proposed finance system would provide new methods for securities settlement combining all individual steps into one transaction and enable tokenized deposits with built-in regulatory checks for wholesale CBDCs. Such a system could also reduce the cost of trade finance for smaller companies.

The unified ledger proposed by the BIS may exceed in scope a similar combined platform envisioned by the International Monetary Fund (IMF) for CBDCs. A unified ledger for cross-border payments would require significant policy harmonization across jurisdictions, the BIS report said.

The BIS is not set on the technological and design aspects of such a unified ledger. However, the mechanism used for effecting the transaction can be decentralized. The next step would be for a group of central banks to come together to take the project forward under a public policy mandate with the help of the private sector, which would handle most of the customer-facing activities.

Edited by Sandali Handagama.