Reuters reports that these institutions are joining forces for the first time to delve into tokenization, a process that transforms traditional assets into uniquely coded 'tokens' usable in more efficient systems. The collaboration will also include Switzerland's central bank, known for its pioneering work in tokenization.
Initially, the primary focus will be on simplifying paper-based procedures, especially in scenarios where wealthy nations contribute funds to the World Bank to support less developed regions. The traditional 'promissory note' representing the original commitment is a target for tokenization, aiming to enhance the ease of transfer when needed.
According to representatives from BIS quoted by Reuters during a conference hosted by the Atlantic Council think tank in Washington, the key objective is to simplify the process of allocating development funds to emerging economies. They also highlighted the potential of tokenization to encode policy and regulatory requirements into a common protocol, addressing challenges such as international money laundering.
Officials also discussed central bank digital currencies (CBDCs), emphasizing the necessity for global rules and technology standards to enable their seamless integration worldwide and interoperability with existing payment systems. They raised questions about the timing of implementing these standards and their adaptability to ensure compatibility with non-CBDC systems, acknowledging the complexities involved in their development and adoption.
IMF’s endeavors to launch a CBDC platform
In June 2023, the International Monetary Fund revealed ongoing efforts towards creating a platform dedicated to facilitating transactions involving central bank digital currencies (CBDCs) between nations.
At that time, IMF representatives advocated for a unified approach to CBDCs, emphasizing that these digital currencies should not be confined within national boundaries. The goal was to establish interconnected systems that improve transaction efficiency and fairness on a global scale. In pursuit of this objective, the IMF was conceptualizing a global CBDC platform.
To achieve global interoperability, the IMF urged central banks to agree on a shared regulatory framework for digital currencies. The absence of such an agreement could result in a vacuum that might be filled by cryptocurrencies. The IMF also highlighted the potential underutilization of CBDC capacity if countries opt for domestic deployment only, underscoring the importance of a collaborative and globally connected approach.