Featured Product

    BIS Paper Outlines Vision for Future Financial System

    April 29, 2024

    In a recent paper, the General Manager of Bank for International Settlements (BIS) and the Indian entrepreneur (Infosys co-founder) Nandan Nilekani have laid out a vision for the Finternet, which is proposed to be a network of multiple financial ecosystems, much like the internet. This concept envisions a future where individuals and businesses would be able to seamlessly undertake transactions and interactions across various platforms and services and transfer any financial asset they like, in any amount, at any time, using any device, to anyone else, anywhere in the world.

    Finternet would pave the way for a user-centric, unified, and universal financial ecosystem brought into the digital era that is inclusive, innovative, participatory, accessible, and affordable, and leaves no one behind. The envisioned system leverages innovative technologies such as tokenization and unified ledgers to dramatically expand the range and quality of financial services. Such an integrated system aims to foster greater participation, offer more personalized services, and improve speed and reliability, all while reducing costs for end-users. In this paper, the authors identify three necessary components for Finternet: an efficient economic and financial architecture, the application of cutting-edge digital technology, and a robust legal and governance framework. Unified ledgers are a promising vehicle to deliver on all three. The paper also provides a blueprint for how key technical characteristics like interoperability, verifiability, programmability, immutability, finality, evolvability, modularity, scalability, security, and privacy can be incorporated and how varied governance norms can be embedded.

    However, delivering on this vision of Finternet would require proactive collaboration between public authorities and private-sector institutions. A basic starting point is that existing laws and regulations should apply to participants and assets in the Finternet and that jurisdictions do not need to create an entirely new bespoke legal framework to deploy unified ledgers. Nonetheless, the development of unified ledgers does raise novel legal and regulatory issues. To this end, the paper emphasizes that unified ledgers and related infrastructure should not provide venues to circumvent laws or to engage in regulatory arbitrage. Another fundamental is the question of whether central banks have the authority to issue tokenized central bank money. Beyond questions of issuance, the legal status of the tokens that exist on unified ledgers requires clarification.

    The paper notes that most of the technology needed to achieve this vision for Finternet exists and is fast improving; however, turning this vision into reality requires experimentation. Only then can we have a full measure of the challenges and the best strategies to overcome these challenges. It is also noted that many central banks are engaged in this necessary process of trial and error. For instance, the Brazilian central bank BCB is exploring the Drex platform, which is a unified ledger where wholesale tokenized central bank money, deposits, e-money, and treasuries coexist. Additionally, the Bank of Korea, the Monetary Authority of Singapore, and seven central banks have teamed up with the BIS Innovation Hub in Project Agorá to investigate how tokenized bank deposits can be seamlessly integrated with wholesale central bank digital currencies (CBDCs) on a public-private platform.

     

    Visit Moody’s website to find out how Moody’s is incorporating cutting-edge technologies, such as artificial intelligence, to help banks meet their existing challenges more effectively.

    Related Links

    Keywords: International ,Tokenization, Unified Ledger, Suptech, BIS, Regtech, Banking, CBDC, Blockchain, DLT

    Related Articles
    News

    NGFS Outlines Options for Supervisory Review of Transition Plans

    The Network for Greening the Financial System (NGFS) recently published three reports on the use of transition plans to boost sustainable finance and manage climate-related financial risks.

    April 29, 2024 WebPage Regulatory News
    News

    BCBS Issues Discussion Paper on Climate Scenario Analysis

    The Basel Committee on Banking Supervision (BCBS) issued a discussion paper on the use of climate scenario analysis to strengthen the management and supervision of climate-related financial risks.

    April 29, 2024 WebPage Regulatory News
    News

    OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.

    April 25, 2024 WebPage Regulatory News
    News

    CFIT to Chair Open Finance Taskforce Announced by UK Government

    The UK government announced the formation of an industry-led Open Finance Taskforce, chaired by the Center for Finance, Innovation, and Technology (CFIT).

    April 25, 2024 WebPage Regulatory News
    News

    BIS and Central Banks Experiment with GenAI to Assess Climate Risks

    A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe

    March 20, 2024 WebPage Regulatory News
    News

    Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures

    Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.

    March 18, 2024 WebPage Regulatory News
    News

    Singapore to Mandate Climate Disclosures from FY2025

    Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies

    March 18, 2024 WebPage Regulatory News
    News

    SEC Finalizes Climate-Related Disclosures Rule

    The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.

    March 07, 2024 WebPage Regulatory News
    News

    EBA Proposes Standards Related to Standardized Credit Risk Approach

    The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU

    March 05, 2024 WebPage Regulatory News
    News

    US Regulators Release Stress Test Scenarios for Banks

    The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

    February 28, 2024 WebPage Regulatory News
    RESULTS 1 - 10 OF 8962