CBDCs, Payments Headline BIS Innovation Hub 2022 Work Programme
Posted by Colin Lambert. Last updated: January 25, 2022
The Bank for International Settlements (BIS) has unveiled its work programme for the BIS Innovation Hub in 2022 – a year in which it will also commence work in new centres and have a new leader thanks to the departure of current chief Benoît Cœuré, to head a French regulatory agency.
The BIS says it will launch new projects into central bank digital currencies (CBDCs), next generation payments systems and decentralised finance (DeFi), expanding its portfolio of explorations seeking to develop new technological public goods for central banks. The programme will also see new projects in green finance, regulatory and supervisory technology and cyber security.
This year will also see further expansion, with the first projects in the London and Nordic Hubs; the expected opening of the Eurosystem and Toronto centres; and the advancement of the strategic partnership with the Federal Reserve System.
CBDCs and improvements in payments systems continue to be an area of exploratory focus, accounting for 13 out of 17 projects that were active in 2021 or will be launched in 2022. This reflects the interests and priorities of BIS member central banks, BIS says.
It adds that one of the highlights of the 2022 agenda is the second BIS Innovation Summit, “Money, Technology, and Innovation” to be held on March 22-23, bringing together senior leaders from the public and private sector and academia.
In terms of regional projects Switzerland will launch Project Rio, that will explore how central banks can use data streaming to monitor fast-paced electronic markets. The first phase built a prototype that collects and processes vast amounts of FX data in real time. In the next phase, the team is designing a production-ready, user dashboard. It is being considered for professional use by some central banks, BIS says.
The Swiss Innovation Hub and Swiss National Bank are also compiling the lessons learned from two CBDC-related projects, Helvetica and Jura, and will subsequently scope new CBDC-related projects that might use Arena, an in-house blockchain platform being built as a testing ground for central banks. Potential areas of focus include DeFi applications, monetary policy implementation and privacy.
In Singapore, Project Ellipse builds a platform to help financial regulators to digitally extract, query and analyse a large quantity of data from diverse sources, incorporating artificial intelligence and machine learning. The code is expected to be published as open source. In a new phase, named Project Viridis, the platform will be tested for supervision of climate-related financial risk and sustainability metrics.
The Singapore team is also continuing its investigation of its own multi-CBDC shared settlement platforms with Project Dunbar; and with the second phase of Nexus, which seeks to interconnect the national instant payments systems of Singapore, Malaysia and Italy and is being observed closely by several other central banks.
In Hong Kong, the Hub will launch a new project to explore whether DeFi technologies – blockchain, tokenisation, smart contracts and customer identification – can improve financing for small and medium enterprises, a historically underserved market segment, according to the BIS. It will also continue to work on mBridge, testing the integration of wholesale CBDCs from four central banks.
The London Hub’s first projects will consider how individuals and businesses can benefit from the development of CBDCs. One will enable the development of innovative payment solutions that can be settled quickly and cheaply with central bank money, while a second will develop a platform supporting applications that individuals and businesses can use to store, transfer and pay with retail CBDCs.
The Nordic centre starts out with two projects. One seeking to demonstrate how a holistic view of payments data could be used to detect illegal activities, such as money laundering, tax evasion and financing of terrorism. The second will investigate the security and resilience demands and solutions that enable CBDCs to be used offline.
With an expanded network of Hub Centres and exciting new projects, the BIS Innovation Hub is now in a stronger position to innovate in a sound, sustainable way, harnessing the benefits of digital technology, serving the public interest, and working cooperatively with the central bank community, academia and the private sector,” says Agustín Carstens, BIS General Manager.