The Bank for International Settlements (BIS) has unveiled its strategic vision for the upcoming year, placing a spotlight on the advancement of digital currency initiatives and the burgeoning field of tokenization. The announcement made on January 23 sets a definitive path for the BIS Innovation Hub’s efforts in 2024, primarily concentrating on the development and research of central bank digital currencies (CBDCs) and the exploration of tokenization’s vast potential.
Project Aurum and the Privacy of CBDC Transactions
The BIS Innovation Hub is gearing up to enter the second phase of Project Aurum, which focuses on privacy in retail CBDC transactions. This move is in line with the Hub’s 2024 program that also targets key areas such as cybersecurity, combatting financial crime, and supporting green finance initiatives.
Advancements in CBDC and Tokenization
Following the successful creation of a wholesale interbank system and a retail CBDC prototype by the Hong Kong Monetary Authority (HKMA) in the preceding year, the BIS is now directing its resources towards the tokenization of financial systems. Cecilia Skingsley, the head of the BIS Innovation Hub, underlined the importance of shifting traditional financial instruments like promissory notes—which are largely paper-based—into the digital realm through blockchain technology, as part of Project Promissa.
Ongoing and New Initiatives
The BIS will not only continue its existing projects such as Project Mandala, Pyxtrail, and Cambridge, but also introduce six new ventures. These include Project Leap, which aims to safeguard payment systems from quantum computing threats, and Project Symbiosis, which will utilize AI and big data for supply chain emissions disclosures. Projects like the NGFS Data Directory 2.0 and Hertha will further enhance access to climate-related data and explore financial crime patterns, respectively.
Central Banks and the CBDC Architecture
Central banks across the Americas are actively working under the BIS’s guidance to establish technical standards for CBDC architecture. Last month’s insights from the Consultative Group on Innovation and the Digital Economy (CGIDE) provided a valuable framework for countries investigating or implementing CBDCs, focusing on interoperability, scalability, and user-centric design, along with security and privacy.
Project Tourbillon’s Privacy and Transparency Balance
In a notable advancement, Project Tourbillon, led by the BIS Innovation Hub, has made significant strides in balancing privacy with transparency in CBDC transactions. The project’s final report suggests a novel system that enables payments while preserving personal information, demonstrating the BIS’s commitment to fostering CBDC technology that does not compromise on user privacy.
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