BIS Blueprint Seeks to Tokenize Fiat Currency with Interoperable System

• The Bank for International Settlements (BIS) released a blueprint for the future of central bank digital currencies (CBDCs).
• The BIS calls its CBDC blueprint “game-changing” and says the key is fostering an interoperable system between banks around the world.
• Crypto and decentralized finance (DeFi) are seen as a flawed system that cannot take on the mantle of the future of money due to its lack of trust in banks, politicians, and middlemen.

The Bank for International Settlements Releases Blueprint for CBDCs

The global central bank umbrella organization known as the Bank for International Settlements (BIS) has released a blueprint for the future of central bank digital currencies (CBDCs). In its new annual economic report, the BIS deploys the language of the blockchain and smart contract industry, saying tokenization of fiat currency “has great potential” but requires a privately controlled and unified system to make it happen.

Key Elements Of Blueprint

The BIS’s blueprint includes CBDCs, tokenised deposits, and other tokenised claims on financial and real assets. It also envisages these elements being brought together in a new type of financial market infrastructure (FMI) – a ‘unified ledger’ – that would enable seamless transferral of value between banks around the world.

Banking Industry Attempts To Create Privatized And Centralized Blockchain Systems

The banking industry has attempted to create privatized and centralized blockchain systems to tokenize fiat currency; however these attempts have thus far created disjointed “silos” that lack interoperability. The BIS believes their CBDC blueprint could be game-changing by providing settlement finality from central bank money residing in an FMI with other claims.

Crypto/ DeFi Flawed System Without Trust In Banks

The BIS takes this opportunity to bash crypto’s push to create decentralized systems without reliance on any trusted third party such as banks or politicians by saying crypto is “self-referential, with little contact with the real world” and lacks “the anchor of trust in money provided by the central bank“.

Unified Ledger Needed For Tokenization To Reach Its Potential

Ultimately, the BIS believes that a unified ledger is needed in order for tokenization to reach its full potential; one which leverages trust in both central banks as well as technology such as smart contracts, application programming interfaces, etc., all while promoting financial inclusion and providing everyone with a level playing field.