BIS Innovation Hub Unveils Heavy 2023 Programme
Posted by Colin Lambert. Last updated: February 8, 2023
The Bank for International Settlements (BIS) Innovation Hub has published its priorities for 2023, including more work on improving payments systems and experimenting further with central bank digital currencies (CBDCs). It will also seek to shape the future of financial regulation and supervision; as well as on greening and securing the financial sector
The work programme also includes Project Pyxtrial, a new experiment being launched by the Hub’s London centre to enable the systemic monitoring of stablecoin balance sheets. The BIS explains that most central banks lack tools to systemically monitor stablecoins and avoid asset-liability mismatches, adding the project will investigate various technological tools that may help supervisors and regulators to build policy frameworks based on integrated data.
The Hub currently has 21 ongoing, and five concluded projects, and says it will increase the integration of its global network with additional 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 expected to open soon, hosted by the European Central Bank, the Bundesbank and the Bank of France. It will work with all euro area central banks.
In terms of output, the BIS says the Hub has developed a wide range of technological solutions to problems of relevance to central banks. These solutions take the form of proofs-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,” the BIS states.
Building on the knowledge gained from wholesale CBDC projects, the Hub says it is now experimenting more with retail CBDCs, for example, on the technology architecture of a two-tiered distribution model; on the distribution of retail CBDC through an open API ecosystem; and examining cyber security resilience, and scalability and privacy.
Ongoing experiments are also showing how wholesale and retail CBDCs, as well as the interconnection of domestic payments systems can deliver faster, cheaper and more transparent cross-border payments. The BIS says three multi-CBDC experiments – Jura, Dunbar and 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 in Project Mariana.
It adds that other improvements in payments are being explored with a focus on payment synchronisation, on a data-driven approach to combatting money laundering across firms and across borders, and novel liquidity saving mechanisms.
Another area of focus is on projects aiming to shape the future of regulation, supervision and finance. For example, the Hub says development of tools for monitoring financial markets in real time, cryptocurrencies and decentralised finance and other regulatory purposes. Technological innovation in corporate digital identity has been examined while specific use cases for the supervision of financing for small and medium-sized enterprises are being explored.
Projects on greening and securing the financial system seek to improve climate-related data availability and analysis, as well as develop concrete digital solutions to the trading of green bonds. Additionally, the cyber security portfolio has been growing with several projects that explore the cyber resilience of CBDC, as well as projects that focus on the Secure Coding Competition and quantum-resistant cryptography.