Tokenisation in the context of money and other assets: concepts and implications for central banks

The growth in projects and experiments in regulated financial markets has increased the relevance of tokenisation for central banks. Against this background, this report was prepared by the Bank for International Settlements (BIS) and its Committee on Payments and Market Infrastructures (CPMI) for the Brazilian G20 Presidency.

The report sets out the concepts related to digital tokens and programmable platforms. Token arrangements can change existing market structures by providing platform-based intermediation across the end-to-end life cycle of financial assets. While this could decrease transaction costs and enable innovative use cases, the potential of token arrangements to improve the safety and efficiency of the financial system will require sound governance and risk management. The risks typically associated with financial market infrastructures also apply to token arrangements, but they may materialise differently.

Developments in tokenisation offer an opportunity for central banks to reflect on the role of central bank money in the digitalising financial system. Other key considerations for central banks identified in the report relate to the design of central bank wholesale payment systems, oversight and monetary policy.