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The Bank for International Settlements (BIS) – a Swiss-headquartered forum of central banks – has announced a groundbreaking initiative, Project Agora, designed to transform cross-border payments.
This major public-private partnership brings together central banks and leading private financial institutions to explore the potential of tokenization in streamlining international transactions, according to an announcement this week.
Building on past challenges
Cross-border payments have long been a thorn in the side of businesses and individuals alike. Inefficiencies abound, with transactions often sluggish, expensive, and riddled with complexities. These challenges stem from a number of factors, including inconsistent regulations, time zone complexities, and intermediary overload.
Project Agora aims to address these issues head-on by harnessing the power of tokenization. The project will explore how tokenized commercial bank deposits can be seamlessly integrated with central bank money on a programmable, public-core financial platform.
This innovative approach has the potential to unlock significant benefits for cross-border payments, including increased speed, reduced costs, and enhanced transparency, BIS said.
"We want to explore a new common payment infrastructure that could bring all these elements together and might make the system work more efficiently together on a digital core financial infrastructure. We will not just test the technology, we will test it within the specific operational, regulatory and legal conditions of the participating currencies, together with financial companies operating in them," Cecilia Skingsley, Head of the BIS Innovation Hub, said in a statement.
Global collaboration
BIS has secured the participation of seven leading central banks for the project, from France (representing the Eurosystem), Japan, Korea, Mexico, Switzerland, England, and the United States (the Federal Reserve Bank of New York).
Furthermore, the Institute of International Finance (IIF) has convened a large group of private financial firms to collaborate on the project. This public-private partnership fosters innovation while ensuring the real-world applicability and widespread adoption of the solutions developed.
Project Agora is still in its early stages, focusing on exploration and development. The BIS intends to issue a call for expressions of interest in the near future, aiming to broaden participation and accelerate progress.
