BIS envisions global ‘Finternet’ running on unified ledger technology

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The Bank for International Settlements (BIS) has published a paper on unified ledger technology, advocating for a “financial system for the future” called the Finternet.

On Monday, the BIS presented further arguments for adopting unified ledger technology as “a vehicle for an improved financial system.”

Co-authored by BIS general manager Agustin Carstens, the paper envisioned a financial system for the future called the “Finternet,” which would run on unified ledger technology.

“The envisioned system leverages innovative technologies such as tokenization and unified ledgers, underpinned by a robust economic and regulatory framework, to dramatically expand the range and quality of financial services,” the paper explained.

“This integration aims to foster greater participation, offer more personalized services and improve speed and reliability, all while reducing costs for end users.”

The BIS paper argued that a Finternet built on unified ledger technology would limit a number of potential issues related to speed, compliance, and privacy in current systems by providing a “common venue” (i.e., a shared programmable platform) where digital forms of money and other financial assets coexist.

According to the BIS, unified ledgers have two defining characteristics. First, they combine all the components needed to complete financial transactions—financial assets, ownership records, rules governing their use, and other relevant information—in a single venue. Second, money and other financial assets exist on the ledgers as executable objects, which means that they can be transferred electronically using pre-programmed smart contracts.

Together, these design features allow individuals and businesses to move money and other assets safely and securely, with less need for third parties, external authentication and verification processes, or reliance on external clearing, messaging, or settlement systems.

“They aim to provide a quantum leap over existing financial infrastructure by seamlessly integrating transactions and opening the door to entirely new types of economic arrangements,” the paper read, describing the benefits of unified ledgers.

The paper also outlined the advantages a Finternet powered by unified ledger technology would have over digital transactions on other platforms.

“Even when individuals use sophisticated front-end interfaces to make supposedly ‘digital’ transactions, behind the scenes, movements of money and other financial assets often rely on the owners of siloed proprietary databases to initiate and process transfers,” the BIS argued.

Unified ledgers, on the other hand, “combine all the components needed to complete financial transactions—financial assets, ownership records, rules governing their use and other relevant information—in a single venue.”

However, the paper was keen to clarify that the concept of a unified ledger does not mean “one ledger to rule them all,” or a single ledger that encompasses all financial assets and transactions in an economy.

“Depending on the needs of each jurisdiction, multiple ledgers could coexist,” the paper said.

These various ledgers could be connected to each other, as well as other parts of the financial system that exist outside the Finternet, and the functions of individual ledgers could evolve and merge over time.

Unified ledgers, a BIS passion project

The BIS—an international financial institution which is owned by member central banks—has been pitching unified ledger technology since early 2023, when Carstens gave a speech to the Monetary Authority of Singapore (MAS) floating the idea of a developing a “unified ledger” with a common programming environment.

“A unified ledger is a digital infrastructure with the potential to combine the monetary system with other registries of real and financial claims. It would need to be a public-private partnership with a clear division of roles, and where the central bank is tasked with underpinning the trust in money,” Carsten said.

He went on to argue that such a system would help tie together wholesale and retail
central bank digital currencies (CBDCs), payment systems and their interlinkages across borders, and the tokenization of different assets, including tokenized deposits.

In June 2023, the BIS released details for the architecture of such a unified ledger designed to support a range of digital assets under the same network.

“Bringing together central bank money, commercial money, and different assets on the same platform, all tokenized and interacting, opens up a whole new range of possibilities,” BIS head of research Hyun Song Shin said at the time.

More recently, this month saw the BIS launched Project Agorá: a collaboration with seven central banks to create a platform for cross-border CBDC payments and tokenized money transfers.

It is one of multiple BIS projects in the works exploring tokenization and building on top of a unified ledger.

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