A top official has revealed that the Bank for International Settlements (BIS) is launching its first tokenization project with the World Bank to speed up, cut costs, and secure development lending.
In her speech at an event organized by the Atlantic Council in Washington DC, Cecilia Skingsley talked about the new project, the future of money, the role of central bank digital currencies (CBDCs), and more. Skingsley is the Head of the BIS Innovation Hub, a position she took over in June 2022 after serving as the first deputy governor of the Swedish central bank.
The project is still in its early stages, and it was the first time it had been unveiled to the public, Skingsley told the audience. It brings together the BIS, the World Bank, and the Swiss National Bank (SNB) and seeks to “simplify the process for making development money available for emerging and developing economies through international financial institutions.”
The three entities want to tokenize promissory notes, which rich countries use to fund development projects in the developing world. Promissory notes currently rely on paper-based processes that are slow, tedious, expensive, and prone to errors. Skingsley believes tokenizing them would make a mark, with the World Bank’s notes amounting to $115 billion in 2022.
And while this is not the grandest tokenization project, BIS believes it’s a step in the right direction.
“It’s not going to revolutionize the world, ladies and gentlemen, but by trying these things and make it work in a real-life setting, I think we will make a lot of progress,” Skingsley stated.
Skingsley also delved into the future of money and the role of CBDCs noting that digital payments will be the global standard as cash usage wanes. In her home country, only 1% of the gross domestic product (GDP) circulates via cash.
This makes digital payments critical, and with private fintech firms dominating this field, Skingsley says CBDCs can reposition central banks at the heart of the digital economy. The economist pointed out that leaving digital payments to the private sector is too risky as profit-seeking firms don’t always have the consumers’ interests at heart.
Central banks not interested in personal data
On privacy concerns with CBDCs, she dismissed naysayers and reminded the audience that all technology is neutral—it’s good or bad depending on how it’s used.
Privacy has been a key point of contention in the development of CBDCs, with their fiercest critics describing them as dystopian surveillance tools. This opposition is most fervent in the U.S., where Republicans are working to prevent the launch of a digital dollar.
Florida Governor and presidential candidate Ron DeSantis banned the use of the digital dollar in Florida in 2022, claiming it’s President Joe Biden’s attempt to promote “government-sanctioned surveillance.”
House Republicans have also recently advanced a bill prohibiting the U.S. Federal Reserve from advancing a CBDC.
However, according to Skingsley, these concerns are misplaced.
“Let me also state for the record, once again, that central banks have no commercial interest in personal data – unlike the private sector,” she stated.
For those who believe that a CBDC is a solution in search of a problem, Skingsley says that humanity only advances when visionaries pursue what can be, not just what is. Drawing lessons from history, she referred to the invention of Bluetooth. At the same time, Swedish firm Ericsson only invented it for wireless headsets; it anchors powerful applications today, including wearable devices and the Internet of Things (IoT).
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Tokenizing processes, accounting & mapping transactions on-chain
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Source: https://coingeek.com/bis-world-bank-to-tokenize-promissory-notes/