BIS launches project Agora with participation of seven central banks. PART 1.
Which blockchains will be part of the Agora project?
Greetings to all those who are thirsty for knowledge about the financial world intertwined with digital technology.
I have been following such a structure as BIS for a long time. It is a kind of a certain indicator of the progress of developments in the financial world, which wants to move to the “digital rails”. So to say to implement DLT technology. I propose to consider a new project from BIS.
As a rule, the projects of the BIS Innovation Center are experimental in nature and are aimed at studying and providing public goods to the world central banking community. The BIS has indeed experimented a lot with digital technologies in the financial sector and has created many projects. The culmination of these experiments was the Agora project.
On April 3, 2024, the Bank for International Settlements (BIS) along with seven central banks announced plans to join forces with the private sector to explore how tokenization (hereafter RWA) can improve the functioning of the monetary system in the Agora project.
So why is the name of the project Agora? In Greek, it means “marketplace.” Which currently brings together seven central banks: the Bank of France (representing the Eurosystem), the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, the Bank of England and the Federal Reserve Bank of New York. York. They will seek to work in partnership with a large group of private financial firms set up by the Institute of International Finance (IIF).
The BIS intends to call on private financial institutions (which also include public networks — blockchains) to express interest in joining the Agora project. IIF will act as a facilitator and organizer of private sector participants. Several regulated financial institutions representing each of the seven currencies are expected to participate. Specific guidelines and requirements will be issued shortly. Being a member of the IIF is not a prerequisite for participation in Project Agora.
IIF’s 400 member organizations from more than 60 countries include leading players in the financial services industry headquartered in virtually every region of the world. Member companies include a wide variety of businesses, including commercial and investment banks, asset managers, insurance companies, professional services firms, exchanges (a good sign for the crypto industry, though only exchanges are regulator-appropriate systems), sovereign wealth funds, hedge funds, central banks and development banks. The most high-profile names on the list (please note Ripple is not on the list): BlackRock, Inc. (United States), Circle Internet Financial Ltd. (United States), Coinbase, Inc. (United States), IBM (United States), PayPal (United States), Rothschild & Co. (France), SWIFT (Belgium)….
The detailed list of participants can be found on the official website of IIF .
What do our globalists want to do? Let’s take a closer look at the technical aspects.
✅ The project is based on the concept of a single registry. I advise you to take a close look at the BIS rhetoric regarding cryptocurrencies and the crypto industry in general.
The key elements of the plan are CBDC, tokenized deposits and other tokenized financial and real asset requirements. The plan envisions combining these elements into a new type of financial market infrastructure (FMI) — a “ single registry “. All the benefits of tokenization can be leveraged in a single registry due to the finality of settlement that comes from having central bank money in the same place as other claims.
Moreover, by having “everything in one place,” a single registry provides an environment in which a wider range of contingent actions can be automatically executed to address information and incentive problems. Even in the short term, a single registry can open up mechanisms with a clear business case. Opportunities include new types of deposit contracts that enhance financial stability, improved supply chain financing, and new ways to improve the resilience and integrity of the financial system.
The concept of a single registry can be broad or narrow, with the first instances likely to depend on the specific application. For example, one registry may aim to improve securities settlement, while another may facilitate trade finance in supply chains. Tokenized forms of money will appear in each registry as a means of transaction. Each single registry will only aggregate the intermediaries and assets required for each application. As we see intermediaries are the same service providers.
The scope of the registry will also determine the relevant players that should participate in the governance mechanisms. Individual registries may be linked through application programming interfaces (APIs) or, as their scope expands over time, they may include additional assets and objects or be combined together. Some of the benefits envisioned by a single registry can be realized by linking existing systems via APIs into a “network of networks.” While such a network of networks would still consist of separate systems and would not provide full programmability between systems, the worst disadvantages of disparate systems could be mitigated.
The next phase of financial system development would consist of the best efforts of both the private and public sectors. Central banks could work with regulated private organizations to develop technology solutions and standards for specific use cases. With a public interest mandate, central banks are best positioned to create a common ground for each use case by engaging with the monetary system.
Cryptocurrency and decentralized finance (DeFi) have provided insight into the prospects for tokenization, but cryptocurrency is a flawed system that cannot take on the mantle of the future of money. Not only is cryptocurrency self-referential and has little connection to the real world, but it also lacks the anchor of trust in money provided by a central bank. While stablecoins have skyrocketed to fill this vacuum by mimicking central bank money, the explosion of the cryptocurrency universe in the past year shows that there is no substitute for the real thing. Beyond cryptocurrencies, efforts by commercial banks and other private sector groups have explored tokenization for real-world use cases. But these efforts have been hampered by the siloed nature of each project and the resulting disconnect from other parts of the financial system. These projects also lack integration with a tokenized version of a settlement asset in the form of a central bank digital currency (CBDC).
You can see for yourself what the BIS says about cryptocurrency and comparing it to money. But nevertheless it recognizes stable coins and their importance in filling the vacuum between fiat currencies and cryptocurrencies. After all, today’s capitalization of 2.5 trillion dollars is not a figure that can be ignored and let float free. I suggest you watch my breakdown of the plan to regulate the crypto-industry and stablecoins in the UK, as well as an explanation that stablecoins and cryptocurrency will complement the financial system, but will never replace it. This is very important information to complete the picture of what is happening in the world right now. The video is in Russian language 🎦
The BIS also raises the issue of the silos of blockchains, registries, systems and that is a problem for the regulator. They want it all to work as a single entity — a registry. That’s why crypto industry standards will be introduced, in particular ISO 307 (DLT standard). As well as all of us are used ISO 20022 standard, which is more related to the standard of financial messages between banks and organizations.
BIS brings forward interoperability, i.e. the possibility to work in a single registry to which other registries of sovereign states will be connected, but according to the rules of BIS.
Your attention in the crypto industry is diverted to networks, blockchains, but no one tells you that they are useless without bridges and interoperability. From a technical point of view, most blockchains like Bitcoin, XRPL and others are not able to communicate with each other, and if there are bridges between them, it is a green light to hack these bridges, because they are vulnerable. And that’s why none of the big money is going to invest in it. But there are projects — data blockchains — that are built to bridge assets and data sets between disparate blockchain systems. Example Chainlink, Flare Network, Band Protocol and others.
About interoperability I suggest you watch my breakdown, in the Chainlink + SWIFT interoperability view. The video is in Russian language 🎦
The following is an excerpt from the article. ⬇️
The collapse of cryptocurrency and the uncertain progress of other tokenization projects underscore a key lesson. The success of tokenization relies on the confidence provided by central bank money and its ability to bring together key elements of the financial system. This ability stems from the central bank’s role at the core of the monetary system. Among its many functions, the central bank issues the unit of account of the economy and ensures the finality of payments through settlement on its balance sheet. Relying on the trust in central bank money, the private sector uses its creativity and ingenuity to serve its customers. In particular, commercial banks issue deposits, the most common form of money held by the public. Supported by regulation and supervision, this two-tier structure preserves the “oneness of money”: payments denominated in the sovereign unit of account will be settled at par, even if they use different forms of private and publicly issued money. Tokenization is a more fundamental way to address the shortcomings of the current system.
I would like to draw your attention to the last expression, they want to tell us that no matter what the money of a sovereign state represents, it will still have the value of the money units of that state. That is, they are once again hinting to us about steblecoins backed by the money of banks. That is what RWAs are. Tokenized commercial bank deposits can be easily integrated with tokenized wholesale central bank money in a public-private programmable underlying financial platform.
Public-private programmable core financial platform. And so at the head of course is the state, which chooses the best technical solutions from companies, blockchain or other developments (which is why consortiums of technology and crypto companies were created), which is exactly what makes the “frankenstein” of the technology world. An example is the Hyperledger consortium. Simply put, modular software with the implementation of cryptography, as well as DLT solutions.
Please note that this is very important, we are on the heels of the quantum system, which completely changes all the rules of the game in the world of blockchain. There will be separate articles on this topic, as well as videos.
Cryptocurrency companies themselves are part of these consortiums and offer to take their developments for the opportunity to be among the financially significant elements of the new world.
✅ Now let’s talk in more detail about RWAs.
Cecilia Skingsley, Head of BIS Innovation Center ⬇️
We believe tokenization is the next frontier in terms of the digitalization of money and payments, Agora is the most ambitious project launched by the BIS Innovation Centre. Its reach is global, we have seven leading central banks from around the world taking part in the project.
We can see from Cecilia Skingsley’s words that one of the main areas of focus for the BIS in the digital economy is tokenization, i.e. RWAs. In this regard I have released a video that explains how the tokenization of the whole world will take place, I suggest you read it. The video is in Russian language 🎦
There is a very good service that shows already tokenized assets on various networks, as well as those that are about to be released. I advise you to explore it, as it is a rational investment based on the real needs of the world and the economy.
Pay attention to the slide and which networks are already doing it (Ripple and XRPL are not there).
Stablecoin issuers as of 07/04/2024. pic 1 ⬇️
If you watched my video about the regulation of steibcoins in England then you will be able to draw the right conclusion from this slide that it will all be regulated, but how, the answers are in the video. Pay attention to blockchain networks and their shares, I wouldn’t bury USDT (it will probably just lose a small part of its capitalization and be regulated).
Tokenized treasuries as of 07/04/2024. pic 2 ⬇️
Once again, Ethereum is taking a big chunk of it. Why do you think that is? A “tormaznu” and expensive network has such a resonance on usage? One answer is smart contracts. And plus the network has undergone real development and has given almost the entire DEFI and RWA space life and opportunities to scale into other unique projects such as Constellation (please note, all this did not happen thanks to XRPL). Also the lion’s share is taken by Stellar, which is actually integrated into many payment solutions and has a real application in RWA, as well as in the use of Les Nations Unies to help Ukraine. Let me remind you about the pilot project of electronic hryvnia on Stellar (and all this again not on XRPL).
Tokenized private credit on 07/04/2024. pic 3 ⬇️
Claims exchanged on programmable platforms are called tokens . Tokens are not simply digital records in a database. Rather, they integrate records of an underlying asset, typically found in a traditional database, with the rules and logic that govern the transfer of that asset. Consequently, while in traditional systems the rules governing the renewal of asset ownership are typically common to all assets, tokens can be customized to meet specific user or regulatory requirements that apply to individual assets.
As you can see each token can be programmed for individual needs with specific conditions. Currently, interchangeable tokens in registries (e.g. XRP), cannot be programmable. But if you take Flare Network’s F-asset, the XRP token gains programmability with Flare Network’s special functionality. You have seen already wrapped assets or synthetic assets — it’s the same thing but with less functionality for now. Example on slide pic 4 ⬇️
Tokenization offers two important opportunities. First, by discarding messaging and using account managers to update records, it provides greater layout capabilities, so that multiple actions are combined into a single executable package. Second, it provides conditional execution of actions through smart contracts, i.e., logical statements such as “if, then, or else”. By combining linkability and contingency, tokenization makes conditional execution of actions more achievable, even highly complex ones.
Many interesting real-world applications require tokenization of assets that currently exist in traditional databases. These assets can range from financial securities whose ownership is registered in securities depositories to real assets such as commodities or real estate. The process of tokenization of such assets takes place through so-called ramps, which define the mapping between assets in traditional databases and their counterparts in tokenized form. Assets in a traditional database are immobilized or “locked” and serve as collateral for tokens issued on a programmable platform. Locking the assets ensures that the transfer of their tokenized counterparts guarantees the transfer of the underlying assets. Example on slide pic 5 ⬇️
⭕️ A highlight for those who have read to the end. In the words of Cecilia Skingsley, head of the BIS Innovation Center, the introduction of smartphones, smart watches and other gadgets into our daily lives was necessary to transition to the CBDC digital economy. “It feels “good” to feel like one step in the plan to globally reshape the world.
⏭️ In the second part of this article, we will talk about smart contracts, registries and CBDC. ⏭️
Thank you for your attention️ ❤️
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This article is not financial advice and does not encourage you to take any action.
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