Tokenized securities say it's easy, but CBDC is in trouble? What does the latest BIS report say

Original source: Yahoo! Finance ,

Author: Danny Nelson

Compilation: Odaily Planet Daily Moni

One of the most important tasks for BIS researchers, the central bank's central bank, is to plan for a better future for global payments, and they have spent a lot of time in their latest quarterly report. related question.

This Basel-based financial institution has just completed a 138-page analysis report, which believes that future technological development trends including tokenized securities, central bank digital currencies, cross-border payments and P2P innovations may be good Shaping the payment infrastructure.

Hyun Song Shin, head of research at the Bank for International Settlements, said the accelerating pace of change and potential disruptive innovations have prompted policy makers to prioritize the evaluation of new payment systems. Agustín Carstens, general manager of the Bank for International Settlements, said in the introduction to the report:

"The most transformative option for improving payment methods is P2P technology, which connects payers and payees directly and minimizes the number of intermediaries."

Tokenized securities: easier said than done

According to the BIS report, tokenizing securities on a distributed ledger can simplify the settlement cycle. Compared to the efficiency that some investors are willing to assume, tokenized securities are more efficient. The BIS researchers' conclusions seem somewhat contradictory, because it seems to imply that the settlement cycle used by existing investors is inefficient. Although users have adapted to the relevant processes, the traditional system still has intermediary and liquidity management problems. People have to deal with business within these barriers.

In fact, if the distributed ledger system is to optimize the existing system through decentralization, it will undoubtedly touch the interests of some people in the traditional financial field. Therefore, the BIS believes that at least at this stage, market participants may not want to use new technologies to shorten the settlement cycle, because once this is done, liquidity requirements will be increased, and market makers will obtain funds and securities for settlement. Time will also be greatly reduced.

Therefore, if you comprehensively evaluate from the perspective of risk / reward, you will find that it is not easy for tokenized securities to be truly implemented. Not only that, the BIS research team also discovered many short-term issues, such as legal issues related to securities tokens, which need to be resolved before the distributed ledger securities system is officially implemented.

Even if these problems are solved, financial institutions still need to face a series of other problems such as operations, risks, and general account-based systems, so the Bank for International Settlements concludes in its report that distributed ledger systems and smart contracts are used for securities settlement. The application in the field of settlement and settlement has yet to be proven.

However, the researchers also pointed out that if the distributed ledger system and smart contracts are to be successfully applied in the field of securities clearing and settlement, the key is to make the tokenized system interoperate with the traditional account-based system.

Central bank digital currency: may be in trouble

The future application of BIS researchers on tokenized securities is only part of its report, and the real protagonist of the report is: the central bank's digital currency.

In fact, the BIS has many questions about central bank digital currencies, such as:

1. Should the central bank digital currency be a retail or wholesale type?

2. Should central bank digital currencies be account-based or token-based?

3. Should central bank digital currencies run on distributed ledgers or on centralized or hybrid systems?

4. Is it really necessary for the central bank to launch digital currencies?

However, the BIS did not explicitly answer the above questions in the "Retail Central Bank Digital Currency Technology" section of the report, but the researchers listed factors that must be considered in relevant situations, such as:

1. If the central bank's digital currency does not have any advantages compared to existing payments, then it is meaningless to develop such a system;

2. The convenience of consumers in using central bank digital currencies will not be more convenient than cash or credit cards;

3. Retailers will not easily fail to meet the "peak demand" payment system;

BIS researchers believe that central bank digital currencies based on distributed ledgers may be in trouble, and consensus mechanisms usually slow down transaction throughput and cause trouble for retail systems, which may only bear millions of dollars per day Micropayment transaction volume. However, wholesale central bank digital currency systems–especially large-scale payments between banks and major players–may be easier to adapt to the consensus limits of distributed ledger systems,

In addition, how the central bank's digital currency system achieves the decentralization goal is also a problem. Although decentralization eliminates the risk of a centralized single point of failure, it also increases the possibility of new vulnerabilities. The key problem of traditional centralized architecture is that if there is a problem with the top node, such as a targeted hack, the entire system will be paralyzed. The main vulnerability of the distributed ledger system is the consensus mechanism, such as being attacked by DDoS.

At present, global banks are still discussing the issue of distributed ledger technology and central bank digital currencies. As the BIS researchers have pointed out, the existing central bank digital currency experiments are not satisfactory. Some central banks have publicly expressed concerns about the application of distributed ledger technology on fiat currencies, but some central banks are advancing experiments with central bank digital currencies.

Payment infrastructure: problems can persist and be difficult to resolve

Agustin Carstens, general manager of the Bank for International Settlements, said that in essence, the world needs to consider the fundamental impact of new back-end payment infrastructure. Although it is unclear what private companies may eventually do, and it is not clear whether stablecoins will be a precursor to the failure of certain financial institutions, but with the launch of the Facebook digital currency project Libra, central banks have begun to speed up the assessment of related issues Speed ​​up.

Not only that, but the BIS believes that these issues may be long-standing and difficult to resolve, and therefore need to seek global solutions. In order to solve the problem of information exchange between financial institutions around the world, the Bank for International Settlements has recently launched an "Innovation Center" designed to work with bankers and monetary policy researchers to develop a framework for digital innovation. The Bank for International Settlements revealed that the "Innovation Center" has branches in Switzerland, Hong Kong, China and Singapore, which can help formulate unified policies across different financial networks.

Finally, Agustin Carstens, General Manager of the Bank for International Settlements, concludes:

"The BIS Innovation Center needs to address a key question: Do we need to reinvent money for a changing environment? Or should we focus on optimizing the way currency is issued and used?"