SWIFT's take on unified ledgers, IMF's CBDC research and Brazil DREX vision. In the tokenization segment, Visa unveils a new tokenization platform that'll allow central banks and financial institutions to launch their own stablecoins.
For all the key details of new Distributed Ledger Technology (DLT) projects in the banking world, real-world asset (RWA) tokenization, stablecoins, and central bank digital currency (CBDC) updates, the Observers 'Banking and CBDC Roundup' weekly has you covered.
We kick off with an announcement from the global bank messaging network SWIFT, which has unveiled plans to trial transactions involving regulated digital assets next year. It's hoped the switch will make trading faster and less expensive, all while eliminating intermediaries.
This comes about seven months after SWIFT revealed it's developing a platform that connects CBDCs to the wider financial system, reducing fragmentation in this still-nascent market.
While SWIFT has no details on the technical choices for the coming product, the previous notes from the company had revealed that SWIFT is exploring options to integrate its financial messaging system as an additional data layer on top of one of the global ledger initiatives such as Unified Ledger by BIS or Regulated Liability Network.
The International Monetary Fund (IMF) has released two reports: one on the implications of CBDC on monetary policies and another that examines how central bank digital currencies fit into the payments landscape, especially when compared with faster payments and e-money.
To analyze the implications for the monetary policies, the report cites examples of Cambodia's Bakong system, Omnibus accounts of the Bank of England, and other relevant cases. The authors conclude that while CBDC may raise operational concerns such as in liquidity management, the careful design of CBDC features can mitigate these adverse impacts.
Explaining the role of CBDC in the payments landscape and how that form of money is different, the authors wrote:
"CBDC’s distinguishing value lies in its property as public money in an increasingly digitalized economy. The fundamental difference between CBDC, FPS, and e-money is that CBDCs are first and foremost a form of central bank money that could sustain the presence and choice to use a publicly issued money, as well as a public payment solution, in a retail payments landscape which may otherwise be moving toward 100% private money."
Researchers went on to argue that CBDCs can complement existing infrastructure while "bolstering trust in money and payments by preserving choice and fostering interoperability."
In other developments, it's emerged that Brazil is planning to include DeFi elements within its CBDC project — including the development of a "synthetic" version of Drex. The country's central bank plans the digital real to tackle the long-running trilemma of privacy, programmability and decentralization.
Talking at Markus’ Academy event on The Future of Financial Intermediation, Roberto Campos Neto, president of Banco Central do Brasil presented also the Open Finance framework where different payment options, including e-money and other private service providers, are available on an aggregator platform along with CBDC for the customers to choose.
Visa has unveiled a new tokenized asset platform called VTAP, which enables institutional investors and central banks alike to launch digital assets of their own. The Spanish giant BBVA has been named as an early partner, and is planning to create tokens on the public Ethereum blockchain that will undergo live pilots in 2025.
BBVA's head of digital assets and blockchain, Francisco Maroto, told Fortune that this will include a stablecoin — potentially mounting a significant challenge to market leaders including Tether and Circle.
In collaboration with Soramitsu and Japan’s Ministry of Economy, Trade, and Industry (METI), the Government of Palau has officially launched a prototype of a blockchain-based savings bond system named Palau Invest, marking a significant step in improving the economic opportunities of the island nation.
The solution is developed by Soramitsu and operates on Sora’s Hyperledger Iroha 2 based network, an open-source blockchain platform that easily programmable, fast, and highly performant decentralized apps. A custom mobile application allows convenient and secure access to the platform for the end user.
By using a digital ledger, Palau's government managed to upgrade its financial systems without spending significant costs to deploy and run the infrastructure.