The Bank of International Settlements (BIS), the World Bank and the Swiss National Bank have joined forces to test the feasibility of tokenising promissory notes.

Project Promissa aims to develop a platform based on distributed ledger technology (DLT) to provide a ‘single source of truth’ for central banks, government agencies and financial institutions.

The goal is to complete the proof-of-concept (PoC) and testing by early 2025.

The concept is the brainchild of the BIS Innovation Hub, which has previously launched PoCs for the reporting of digital assets, the development of central bank digital currencies and the tokenisation of green bonds.

Tokenisation and the possibility of issuing shares in investment funds on a DLT have become of increasing interest to the asset management industry. For example, a government-backed working group in the UK recently issued a roadmap for such a development.

The benefits of tokenisation are essentially based on the promise of a more efficient post-trade process with fewer intermediaries and greater transparency.

According to the BIS, Project Promissa will enable central banks and financial institutions to have “uniform visibility” of the outstanding promissory notes held by different counterparties.

The promissory notes market is still heavily paper-based and operates across borders and is, therefore, a prime candidate for experimentation with tokenisation.

©2024 fundsTech