BIS Pushes Tokenized Cross-Border Payments Into Real-Value Phase

BIS begins real-value blockchain payment testing with central banks and global firms, advancing tokenized cross-border settlements and digital finance innovation.

The Bank for International Settlements is moving blockchain payments into a major new phase. The institution will soon start real-value transaction testing for Project Agorá.

Major Central Banks Join BIS Blockchain Payment Trials

Bloomberg reports that the project will involve the New York Fed, the European Central Bank, and the Bank of Japan. Additionally, the Bank of England, JPMorgan, UBS, Visa, and Mastercard are participating. The partnership now comprises 7 central banks and over 40 regulated financial institutions globally.

Project Agorá began almost 2 years ago as a blockchain payment project. Since then, the group has been working on ways to enhance international money transfers. Traditional cross-border systems often face delays, high costs, and operational complexity.

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The Basel-based BIS on Wednesday said the project had managed to complete a working prototype. The platform is a mix of tokenized commercial bank deposits and tokenized central bank reserves. In addition, the system is based on a “unified ledger” that is intended for secure settlement processes.

The prototype allows for atomic settlement of several currencies. This translates to instant payments and transfers with no settlement risk. Furthermore, the system could potentially enable 24-hour payments around the world when fully adopted in all participating markets.

BIS said that the platform automates transactions through blockchain smart contracts. This means that financial institutions can directly incorporate compliance rules and payment conditions into transactions. The technology could also minimize manual intervention in settlement processes.

Project Agorá Targets Faster and Safer Global Transactions

The project is targeted at wholesale cross-border payments between financial institutions in particular. Furthermore, the shared ledger enables the simultaneous settlement of tokenized reserves and commercial deposits. This is to enhance transaction coordination and minimize reconciliation between the parties.

The BIS stated that operational frictions remain one of the largest problems in global payments today. Institutions have different systems and verification processes, causing delays. The new blockchain-based system, however, may make it easier to communicate and settle transactions between various jurisdictions.

Payment systems are becoming an area of growing interest for large financial companies, particularly in tokenization. Therefore, Project Agorá is another significant step toward institutional blockchain adoption. In the past few years, Visa and Mastercard have already been scaling up their blockchain payment programs. Likewise, a number of global banks are still working on tokenized settlement solutions.

Central banks’ participation also reflects the increasing interest in digital financial infrastructure. In recent years, many regulators have been researching tokenized reserves and central bank digital settlement models.

BIS did not give an exact date for full commercial implementation. However, the move into real-value testing marks a major milestone for the initiative. The project will now test the performance of tokenized settlements in real transaction scenarios with real monetary value.

If successful, Project Agorá could reshape global cross-border settlement systems over the coming years. Moreover, the platform can also lower transaction fees and enhance the speed and transparency of settlements. The testing phase may also spur more banks and regulators to use blockchain in future payment networks.

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