The Bank for International Settlements has put forth its most compelling case to date for the adoption of unified ledger technology in a jointly authored paper with BIS head Agustin Carstens. This document outlines a new financial system, referred to as the Finternet, which relies on unified ledgers as a fundamental component.
it’s more adaptable and efficient.
“Even when individuals use sophisticated front-end interfaces to make supposedly ‘digital’ transactions, behind the scenes, movements of money and other financial assets often rely on the owners of siloed proprietary databases to initiate and process transfers.”
In simpler terms, unified ledgers bring together all essential elements for financial transactions – such as financial assets, ownership records, usage rules, and relevant data – in a single location. This simplification can help resolve complications arising from varying technical requirements and governance structures, thereby eliminating the need for third-party messaging systems.
The Bank for International Settlements (BIS) does not advocate for a single, all-encompassing ledger. Instead, it suggests the existence of several interconnected unified ledgers. These ledgers would communicate with each other and with the broader financial system, including institutions beyond the Fintech realm, via applications. Asset tokenization, particularly of money, is necessary for transfers to occur using smart contracts within these unified ledgers. The proposal introduces a role for a tokenization manager, responsible for overseeing regulatory compliance.
In February 2023, Carstens proposed the idea of a unified ledger system. This notion was further discussed in the 2023 BIS annual report. Notably, Project Agora, which was recently announced, relies on this same unified ledger concept. A collaboration between the BIS and seven central banks, Project Agora focuses on central bank digital currency and tokenized funds transfer.
SWIFT, a renowned global financial messaging service, has likewise pondered over this concept. Notably, the IMF’s suggested XC platform shares numerous resemblances with it.
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2024-04-15 23:54