Report Highlights Potential Future of Financial System: Global CBDCs and Centralized Tokenization

Report Highlights Potential Future of Financial System: Global CBDCs and Centralized Tokenization

A report published by the Bank for International Settlements (BIS) titled "Blueprint for the Future Monetary System: Improving the Old, Enabling the New" outlines a potential future financial system characterized by a global Central Bank Digital Currency (CBDC) system and centralized tokenization of all assets on a government-controlled blockchain. The report raises important discussions surrounding individual ownership and the power dynamics between central banks, governments, and individuals.

According to the report, tokenization would enable the coding of regulatory compliance into digital assets, giving central banks and governments the authority to determine which transactions individuals can make and exert control over asset ownership. The proposed solution involves a centralized blockchain controlled by central banks, aiming to address the perceived shortcomings of traditional money and build trust through their oversight.

Tokenized asset ecosystems are seen as dependent on CBDCs, which would serve as a reference for asset pricing. The report recommends the tokenization of all bank deposits, with central banks assuming control over them. It also discusses the role of stablecoins backed by government debt, which could potentially reduce the overall availability of liquid assets for other purposes.

The BIS report advocates for tokenized bank deposits and the establishment of a global unified ledger. Tokenized bank deposits, subject to stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) measures, are suggested as preferable to stablecoins. A global unified ledger is proposed to enhance interoperability and privacy, with the potential for atomic swaps involving wholesale CBDCs.

The utilization of a global unified ledger extends beyond financial transactions and could find applications in supply chain solutions and other use cases. The data stored on this ledger would be shared with central banks, governments, regulators, and appropriate institutions.

Central banks are motivated to develop a global unified ledger to prevent new financial technologies from replacing them. However, the report acknowledges that not everyone may willingly participate in such a system due to privacy concerns and potential cybersecurity risks.

While the BIS aims to establish a global unified ledger, the success of this endeavor remains uncertain. The report emphasizes the importance of collaboration in technological development and regulatory oversight. It also highlights the need for individuals to protect themselves by avoiding proto-CBDC systems, conducting thorough research on assets, and staying informed.

In light of these developments, it becomes crucial to monitor timelines for the rollout of fast payment systems or CBDCs. It is advised to keep others informed about these changes and exercise caution by utilizing reputable exchanges and hardware wallets for cryptocurrency transactions. Hedging against centralized financial systems by diversifying investments and staying informed about emerging financial technologies becomes increasingly important in this evolving landscape.

Back to blog