Tokenized Money for International Payments Gets BIS Blessing After Central Banks Pilot

Although tokenization's potential in international transactions has long been discussed as one of the main use cases of tokenized real-world assets, the findings provide rare institutional backing from the BIS, an international financial institution often described as the central bank for central banks. 

The findings, published on 27 May, followed a joint experiment involving seven major central banks and more than 40 private financial institutions. The project, convened by the BIS and the Institute of International Finance (IIF), demonstrated that cross-border transactions using tokenized central bank reserves and tokenized commercial bank deposits could settle atomically, meaning transactions complete simultaneously or not at all across currencies and jurisdictions while preserving settlement finality. 

Atomic settlement is a process in which two sides of a transaction are completed at the same time, removing the risk of one party delivering funds or assets without receiving the other side in return. It has long been one of the core promises of blockchain-based finance and is already widely used in the crypto industry. 

Central banks push 

The initiative, called Project Agorá, is now set to progress into real-value transaction testing with selected participants and currencies. Participating central banks include the Bank of England, the Federal Reserve Bank of New York, the Bank of France, the Bank of Japan, the Bank of Korea, the Bank of Mexico and the Swiss National Bank, while the Bank of Canada has recently joined the initiative. 

"Project participants, including central banks, have expressed strong and sustained interest in further exploring the potential benefits of the prototype," the BIS said in a statement. 

Programmable platform 

Among the project's main findings was that a shared programmable platform could preserve central bank autonomy over domestic currencies while still enabling interoperability between financial systems worldwide. Privacy protections for both balances and transactions could also be maintained with regulatory compliance, it said. 

Future potential applications include conditional payments, always-on settlement infrastructure and stronger anti-money laundering mechanisms. 

The BIS launched the initiative in 2023 to test whether tokenized central bank reserves and commercial bank deposits could reduce the cost, complexity and delays of cross-border payments by operating on a shared programmable platform. 

According to the Federal Reserve Bank of Cleveland, international payments routed through correspondent banking networks can still require several days to settle when multiple intermediary banks and currencies are involved. The inefficiencies persist despite cross-border payments representing one of the financial industry's most lucrative businesses, with the global payments sector generating an estimated $2.5tn in annual revenue. Cross-border transactions alone account for roughly 4% of North American banks' payment revenues, according to McKinsey estimates cited by the Cleveland Fed.