Over 40 private sector financial firms have joined forces with the Bank for International Settlements (BIS) and a consortium of leading central banks in Project Agorá, aimed at exploring the potential of tokenization to enhance wholesale cross-border payments.
What Happened: The project brings together seven central banks: Bank of France (representing the eurozone), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England and the Federal Reserve Bank of New York.
These institutions will partner with the selected financial firms, with the IIF acting as the private sector convener.
The participating firms, chosen from a pool of applicants, represent a diverse range of business models, institution sizes and geographical locations.
To be eligible, companies must be regulated in a participating jurisdiction as a commercial bank, payment services provider or financial market infrastructure company.
They must also be significantly involved in cross-border payments and possess innovation expertise.
Project Agorá, named after the Greek word for “marketplace,” will investigate how tokenized commercial bank deposits can be seamlessly integrated with tokenized wholesale central bank money in a public-private programmable core financial platform.
This exploration builds on the unified ledger concept proposed by the BIS and aims to enhance the functioning of the monetary system while maintaining its two-tier structure.
The initiative seeks to address several structural inefficiencies in current cross-border payment systems.
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These challenges include differing legal, regulatory, and technical requirements across jurisdictions, varying operating hours and time zones and the increased complexity of financial integrity controls.
Currently, these controls, such as customer verification and anti-money laundering checks, are often repeated multiple times for the same transaction, depending on the number of intermediaries involved.
By leveraging smart contracts and programmability, Project Agorá aims to enable new methods of settlement and unlock types of transactions that are currently impractical or not viable.
This could potentially offer new opportunities to benefit businesses and individuals in the realm of cross-border payments.
As an experimental BIS Innovation Hub project, Project Agorá is designed to explore and deliver public goods to the global central banking community.
With the design phase now underway, the financial industry will be closely watching the developments and potential outcomes of this significant public-private partnership.
What’s Next: For those interested in staying informed about developments in digital finance and cross-border payments, Benzinga’s Future of Digital Assets event on Nov. 19 may offer further insights into projects like Agorá and their potential impact on the financial landscape.
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