The Bank for International Settlements (BIS) and seven central banks have announced plans to team up with the private sector to advance the "Agorá Project," aimed at exploring how to tokenise wholesale central bank funds and commercial bank deposits on a programmable platform to enhance the monetary system. 

The Bank of France, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and the Federal Reserve Bank of New York are all taking part. They will collaborate with a "large group of private financial firms" brought together by the Institute of International Finance.

Purpose of Agorá Project

Cecilia Skingsley, Head of the BIS Innovation Hub, said: "Today, numerous payment systems, accounting ledgers and data registries require other complex systems to integrate them. In Project Agorá, we want to explore a new common payment infrastructure that could bring all these elements together and might make the system work more efficiently together on a digital core financial infrastructure. We will not just test the technology, we will test it within the specific operational, regulatory and legal conditions of the participating currencies, together with financial companies operating in them.”

The "Agorá Project" builds on the unified ledger concept proposed by the BIS, investigating the seamless integration of tokenised commercial bank deposits and wholesale central bank funds into a public-private programmable core financial platform. This initiative seeks to improve the efficiency of the monetary system by introducing new solutions using smart contracts and programmability while maintaining its dual-layer structure.

How Agorá Project Improve the Transactions

Smart contracts hold promise for opening up new settlement methods and facilitating transactions that are currently unfeasible, offering fresh opportunities for both businesses and individuals.

Through the introduction of the unified ledger concept, the seven central banks have established a public-private programmable core financial platform. This platform seamlessly integrates tokenised commercial bank deposits with wholesale central bank funds, streamlining traditional payment systems and simplifying transaction processes. This streamlining not only speeds up fund transfers and enhances payment efficiency but also reduces errors and delays caused by manual intervention or system discrepancies, thereby improving payment integrity.

The application of smart contracts further enhances the speed and integrity of payments. Smart contracts can automatically execute predefined payment conditions, completing transactions instantly when specific requirements are met. This not only reduces the need for manual intervention and the risk of human error but also enables the automation of complex transactions without the involvement of third parties. This automation not only speeds up payments but also ensures the accuracy and integrity of transactions.

Through coordinating legal, regulatory, and technical requirements across different countries, the collaboration of the seven central banks has reduced the complexity of cross-border payments. They have jointly developed unified payment standards and processes, reducing obstacles caused by legal differences, time zone disparities, or conflicting operating hours. This coordination not only improves the efficiency of cross-border payments but also reduces costs associated with repeated verification and cumbersome procedures.

Tokenisation and programmable platforms also enhance financial integrity controls. Through smart contracts and programmable rules, controls such as anti-money laundering and customer identity verification can be automatically executed, reducing the complexity and repetition of manual operations. This not only improves the accuracy of controls but also lowers costs, making the entire payment system more secure and reliable.

The involvement of the private sector injects significant innovation momentum into this initiative. Through collaboration with private financial companies, the seven central banks can leverage the technical expertise and market insights of the private sector to drive continuous innovation and optimization of the payment system. This public-private partnership not only accelerates the implementation and application of technology but also allows for flexible adjustment of strategies based on market demands, making the payment system more responsive to real-world needs.