With tokenization projected to Hit $ 19 trillion in 2033Central banks support a new digital reality that can interfere with existing regulations. In order to preserve its roles within the financial ecosystem, central banks adopt the latest technology, and a new pilot led by Bank for International Settlements (BIS) showed that it showed it Smart contracts May be the main tool for supervisory authorities in a tokenized world.
BIS collaborated with the Federal Reserve Bank of New York’s Innovation Center on Initiative, entitled Project bar. Other participants included the central banks in Australia, Canada, England, Mexico, Switzerland and the European Central Bank (ECB).
Project Pine developed a monetary policy tokenized tool kit that central banks could adapt to meet their specific needs. The tool kit was built with smart contracts and tested on various use cases, from paying interest on reserves and switching assets to creating facilities that temporarily change reserves for collateral and implementation of assets and sales.
The project acknowledged that the role of central banks will change drastically in a tokenized world. But through smart contracts, they can quickly and easily adjust their existing frameworks or create new ones, “to optimize the implementation of monetary policy in a tokenized environment.”
Central Bank’s new age for smart contracts
BIS acknowledged it Tokenization is here to stayAnd it is set to explode in value and extent over the next few years. Boston Consulting Groups (BCG) latest report appreciated that tokenized real assets Can be a market of $ 23.4 trillion in eight years, with a conservative projection of $ 12.5 trillion.
In addition to the figures, some of the world’s largest companies are already running tokenization projects. 1.6 trillion dollar asset management giant Franklin Templeton (Nasdaq: FTGTX) Launched A tokened fund a week ago in Singapore that allows investments in as little as $ 20, the first of its kind in the country.
Tokenization would circumvent many of today’s middlemen. For example, an investor can buy a tokenized security directly from another investor, and the transfer of ownership would be done on the chain without a third party commitment.
This bold new system requires a reconsideration of the regulatory tools that central banks have relied on for decades, and this is what Project Pine has worked with.
The system was based on smart contracts that served as a prototype in the central bank, which was housed in a programmable platform that supported tokenized money and securities.
The project then tested the tool set in an installation that contained a multi-agent system with simulated different scenarios. Participants then used visualization tools to display and analyze each activity and results.
The entire project consisted of hierarchical layers, with the settlement layer at the base. Just above, it was the asset warehouse, which hosted the tokenized securities and wholesale money, with the top protocol layer that held the smart contracts.
While Project Pine demonstrated that smart contracts may prove useful tools for central banks in a tokenized system, it noted that the supervisory authorities would need privileged access to market data and higher standards for security and integrity.
The conclusion was it Smart contracts And tokenization “can help central banks better manage extraordinary events.”
“The most important advantage is that facilities can be created and distributed almost directly with smart contracts. This speed, combined with the ability to adjust any of the parameters at any time, gives central banks flexibility when it comes to responding to unforeseen events and rapid crises,” the report concluded.
Dubai’s new rulebook for digital currencies sharpen the controls
In Dubai, the city’s digital Asset Watchdog has updated its regulations for the sector, and it has received VASPs until June 19 to fully follow.
The virtual asset regulation authority (goods) announced Publication of version 2.0 of its rulebook this week, as it says will better balance innovation with investors’ protection.
The updated frames strengthen the controls around token distribution, marginal trading and security wallet arrangement.
“The updates are designed to promote greater market discipline, risk opening unit and operational resistance over Dubai’s VA ecosystems,” said Vara.
The watchdog offers more detailed definitions of popular market products and services as it tries to give texture and avoid ambiguity. It also tightened the requirements for disclosure and risk management, especially in activities involving investors’ funds, such as custody, exchanges and brokers.
See: Tim Draper Talks Tokenization with Kurt Wuckert Jr.
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