About the BIS Innovation Hub

• Upcoming projects focus on safety and security, green finance and next generation financial infrastructures.
• Additional work on advanced data analytics and tokenisation are also planned.
• The Innovation Hub completed 12 projects in 2023 and eight more are ongoing.

The Bank for International Settlements (BIS) today announced the first batch of six new projects in its 2024 Innovation Hub work programme, including experimentations on cyber security, fighting financial crime, central bank digital currencies (CBDCs) and green finance.

As the financial industry adopts new technologies, we need to understand how they affect central banks' core work. Central banks are actively examining the potential for novel technologies to help deliver on their mandates. After completing 12 projects in 2023, we are looking forward to another busy year ahead, in collaboration with central banks, international organisations and other partners.

Tokenisation is an important area where we have already launched one project and are planning more initiatives. Safety is another crucial area. We need to find ways to improve the efficiency of services like payments, without ever compromising on security, following the principle set by the G20 countries.

Cecilia Skingsley, Head of the BIS Innovation Hub

New projects

Project Leap, from the Eurosystem Centre, starts its phase II, aiming to "quantum-proof" payment systems, after successfully establishing a quantum-safe communication channel between the central banks of France and Germany in its first phase. Now, the project will show how a payment system can be protected from the potential threat of quantum computers, which may be able to break the encryption systems used nowadays to protect financial transactions.

Project Symbiosis, from the Hong Kong Centre, will test the use of artificial intelligence (AI) and big data technologies for supply chain disclosure and adaptation. The project will seek to improve the tracking of so-called Scope 3 emissions, which are less well defined and harder to track. It will do this by working with the private sector and civil society organisations in creating AI-supported methodologies for emissions disclosures by small and medium-sized companies.

Also from the Hong Kong Centre, Project Aurum enters a new phase in which it will study the privacy of payments in retail CBDCs. The goal is to leverage expertise from academia and privacy regulators to advance central banks' understanding of privacy in the design of CBDC systems.

Led by the Singapore Centre, Project NGFS Data Directory 2.0 will rebuild the data directory platform of the Network for Greening the Financial System. While the directory's first version was built to systematically identify and map climate-related data gaps, the revised version will aim to facilitate searching and browsing through data sources, making the directory more usable as a public resource.

The recently started Project Promissa tests the feasibility of tokenising promissory notes, financial instruments that help fund multilateral development banks and other international financial institutions. In many cases, these are still paper-based. The project will use distributed ledger technology to simplify their management and transparency. It is conducted jointly with the Swiss National Bank and the World Bank, with the International Monetary Fund as observer.

Project Hertha, launched by the London Centre, aims to test the use of network analytics to help identify financial crime patterns in payment systems. It will map current and emerging financial crime typologies in real-time payment systems, drawing upon lessons from instant payment systems and digital asset networks.

In just over four years, the Innovation Hub has carried out almost 30 projects in various areas and has gone from a handful of people to a 90-strong staff. I am very proud of the work we have done. However, technology will not slow down for anyone, and digitalisation affects everyone. It is our job to make sure technology serves economically meaningful activities.

Cecilia Skingsley

All these new initiatives will be added to existing projects that various Innovation Hub Centres will continue to develop this year: FuSSE, Gaia, Mandala, Nexus phase IV, Pyxtrial, Rio and Viridis.

During 2023, the Innovation Hub concluded projects Atlas, Aurora, Dynamo, Icebreaker, Leap Phase I, Mariana, Meridian, Nexus Phase II, Polaris, Rosalind Phases I and II, Sela and Tourbillon.

In 2023, the BIS Innovation Hub will increase its focus on improving payments systems and experimenting with Central Bank Digital Currencies (CBDC); on shaping the future of financial regulation and supervision; and on greening and securing the financial sector. This year's Work Programme also includes Project Pyxtrial, a new experiment being launched by the Hub's London Centre to enable systemic monitoring of stablecoins.

Going into its fourth year of life, the BIS Innovation Hub is reaching a cruising altitude, with 21 ongoing and 5 concluded projects. The Hub will pursue more integration of its global network with more cross-centre projects such as Mariana, which connects the Singapore, Swiss and upcoming Eurosystem centres, and others.

The Hub is also consolidating its expansion, with the Eurosystem Centre (hosted by the European Central Bank, the Bundesbank and the Bank of France and working with all euro area central banks) expected to open soon.

In terms of output, the BISIH has developed a wide range of technological solutions to problems of relevance to central banks in the form of proof-of-concepts (PoC), prototypes or minimum viable products. They are shared via various communications channels, technical reports and software made available on the BIS Open Tech platform.

CBDCs and improvements in payments systems continue to be a key area of exploration, accounting for 15 of the 26 projects that were active in in the last couple of years. This emphasis reflects the interests and priorities of central banks and the G20 countries' programme to improve cross-border payments.

Building on the knowledge gained from wholesale CBDC projects (eg Helvetia), the Hub is experimenting more with retail CBDCs, for example, on the technology architecture of a two-tiered distribution model (Aurum); on the distribution of retail CBDC through an open API ecosystem (Rosalind); and examining cyber-security (Polaris, Sela), resilience (Polaris) and scalability and privacy (Tourbillon).

Ongoing experiments are also showing how wholesale and retail CBDCs (Icebreaker), as well as the interconnection of domestic payments systems (Nexus) can deliver faster, cheaper and more transparent cross-border payments. Three multi-CBDC experiments (Jura, Dunbar, mBridge) have demonstrated that common platforms with various digital currencies are technically feasible and offer benefits such as lower cost, faster settlement, and operational transparency. Automated market makers for foreign exchange using CBDCs are also being explored (Mariana).

Other improvements in payments are being explored with a focus on payment synchronisation (Meridian) and data monitoring (Aurora), and novel liquidity saving mechanisms (Titus).

Another area of focus is on projects aiming to shape the future of regulation, supervision and finance. For example, the development of tools for monitoring real-time financial markets (Rio and Samba), cryptocurrencies and decentralised finance (Atlas) and other regulatory purposes (Ellipse). Technological innovation in corporate digital identity has been examined while specific use cases for the supervision of small and medium enterprises financing (Dynamo) are being explored.

Pyxtrial, a new project in the London Centre, aims to develop a platform to monitor stablecoin's balance sheets. Most central banks lack tools to systemically monitoring stablecoins and avoid asset-liability mismatches. The project will investigate various technological tools that may help supervisors and regulators to build policy frameworks based on integrated data.

Projects on greening and securing the financial system seek to improve climate-related data availability (Gaia) and analysis (Viridis), as well as develop concrete digital solutions to the trading of green bonds (Genesis 1.0 and 2.0). Additionally, the cyber security portfolio has been growing with several projects (Sela, Polaris) that explore the cyber resilience of CBDC, as well as projects that focus on Secure Coding Competition and quantum-resistant cryptography (Leap).

Beyond its project portfolio, the BIS Innovation Hub will continue to advance other key initiatives including the BIS Innovation Network. The third BIS Innovation Summit, "Technological Innovation in the age of uncertainty" will be held in Basel Switzerland on 21-22 March 2023, bringing together senior leaders from the public and private sector and academia.