Project Agorá, a groundbreaking initiative launched by the Bank for International Settlements (BIS) in collaboration with leading central banks and the Institute of International Finance (IIF), aims to revolutionize cross-border payments. By leveraging tokenization and smart contracts, Project Agorá seeks to enhance the functioning of the global monetary system. Let’s explore the details:
1. Objective and Scope of Project Agora
- Enhancing Efficiency: Project Agorá focuses on improving the speed, integrity, and efficiency of cross-border payments within the existing two-tiered banking system.
- Tokenization: It investigates how tokenized commercial bank deposits can seamlessly integrate with tokenized wholesale central bank money.
- Smart Contracts: Smart contracts play a crucial role, enabling new settlement methods and unlocking transactions that are currently impractical.
2. Public-Private Partnership
- Central Banks Involved:
- Project Agorá brings together seven central banks: Bank of France(representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and the Federal Reserve Bank of New York.
- These central banks collaborate with a diverse group of regulated financial institutions from participating jurisdictions and currency areas.
- Project Agorá brings together seven central banks: Bank of France(representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and the Federal Reserve Bank of New York.
- Role of the IIF: The Institute of International Finance (IIF) acts as the private sector convener, facilitating cooperation between central banks and private firms.
3. Challenges Addressed
- Structural Inefficiencies: Cross-border payments face challenges due to varying legal, regulatory, and technical requirements across jurisdictions.
- Complexity: Operating hours, time zones, and redundant financial integrity controls add complexity.
- Streamlining Processes: Project Agorá aims to streamline these processes and create a more efficient global payment system.
4. Private Sector Participation
- Application Process:
- The call for private sector participation is open until May 31, 2024.
- Interested private sector financial institutions should submit their applications.
- Eligibility requirements, terms, and selection criteria are detailed in the application package.
- Expected Contributions:
- Private institutions are expected to contribute technical expertise to the platform design.
- They will work together with participating central banks to test various use cases.
- Experience with digital innovation initiatives is essential.
5. Potential Outcomes
- Innovative Solutions: Successful collaboration between central banks and private institutions can lead to groundbreaking solutions.
- Unlocking Opportunities: Tokenization and programmability may revolutionize cross-border transactions, benefiting businesses and individuals alike.
Also Read: Stablecoins: Promises vs. Reality: BIS report
Project Agorá represents a significant step toward a more efficient and inclusive global monetary system. By bridging the gap between central banks and the private sector, it aims to transform cross-border payments for the better. Financial institutions interested in participating should explore the application package and join this exciting initiative.