The Bank for International Settlements (BIS) has unveiled the results of Project Agorá, an experimental prototype that demonstrates how tokenized central bank reserves and commercial bank deposits can settle cross-border wholesale payments in seconds. Released on Wednesday, the report marks a milestone in the ongoing exploration of blockchain technology to overhaul the global payment infrastructure.
Project Agorá, launched two years ago, brought together seven central banks and more than 40 regulated financial institutions from around the world. The initiative was jointly organized by the BIS and the Institute of International Finance, targeting the inefficiencies that have long plagued international transactions—slow settlement times, high costs, and complex compliance processes.
The Scale of the Problem
Cross-border payments remain a significant friction point in global trade and finance. According to FXC Intelligence, cited in the BIS report, total cross-border payment flows reached $195 trillion in 2024 and are projected to soar to $320 trillion by 2032. Despite this growth, the infrastructure supporting these transactions has not kept pace with modern expectations. Traditional correspondent banking networks often require multiple intermediaries, leading to delays that can stretch from several hours to multiple days. The costs are also high, with fees and foreign exchange spreads eating into transaction values. Moreover, the sequential nature of anti-money laundering (AML) and sanctions screening creates bottlenecks and high rates of false positives, further slowing down the process.
The BIS has long advocated for improvements in this area, and Project Agorá represents one of the most substantive attempts to leverage distributed ledger technology (DLT) to address these challenges.
The Architecture of Project Agorá
The prototype uses a two-layer blockchain architecture. The first layer consists of jurisdictional ledgers that host tokenized central bank reserves. Each central bank maintains its own ledger within its jurisdiction, ensuring that the tokenized version of its currency remains fully backed and under its control. The second layer is a shared unifying ledger that records tokenized commercial bank deposits. This design preserves the traditional two-tier banking system, where central banks issue reserves and commercial banks create deposits, while introducing the efficiencies of DLT.
The critical innovation is atomic settlement. All balance updates across the different ledgers occur simultaneously or not at all. This eliminates the credit and settlement risks that currently necessitate complex netting arrangements and collateral posting. Once liquidity is locked on the platform, settlement is completed in seconds, regardless of the time zone or operating hours of the participating institutions.
The BIS emphasized that the project upholds the "singleness of money," a principle fundamental to financial stability. Unlike stablecoin-based systems, where the value of private digital tokens can diverge from fiat currencies, the tokenized central bank reserves and commercial bank deposits in Project Agorá are directly convertible and always maintain parity with their respective fiat counterparts. This distinction is crucial for central banks that view monetary sovereignty as non-negotiable.
Compliance and Transparency Enhancements
Another area where Project Agorá shows promise is in streamlining compliance. Currently, each financial institution in a cross-border payment chain conducts its own AML, sanctions, and fraud screening sequentially. This leads to duplication, delays, and high false-positive rates—often exceeding 90% in some systems. The prototype allows institutions to perform these checks in parallel, leveraging the shared ledger to exchange necessary information while preserving privacy. The result is a faster, more accurate screening process that could significantly reduce operational costs for banks.
Transparency is also improved. All parties involved in a transaction can view real-time payment status, while non-participants see nothing. The report suggests that in the future, such visibility could be extended to end users, including debtors and creditors, providing them with granular tracking of their payments—a feature largely absent in today's opaque correspondent banking system.
Participating Central Banks and Next Steps
The seven central banks involved in Project Agorá include the Banque de France (representing the Eurosystem), the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, the Federal Reserve Bank of New York (through its New York Innovation Center), and the Bank of England. These institutions collectively represent some of the most active economies in cross-border trade and finance.
The project is now moving to real-value testing, meaning actual transactions with real currencies will be conducted on the platform. The BIS did not provide a specific timeline for this phase, but it will likely involve selected participants and limited volumes to assess operational robustness. The report identifies several areas that require further development before full-scale deployment: liquidity saving mechanisms to ensure efficient use of reserves, cybersecurity hardening to protect against attacks, and governance frameworks covering settlement finality, data privacy, and risk management.
Broader Implications for the Financial System
The results of Project Agorá arrive at a time when interest in central bank digital currencies (CBDCs) and tokenization is accelerating. The Bank of England, for example, recently proposed extending the operating hours of its RTGS and CHAPS settlement systems to near-24/7, signaling a recognition that the future of payments is continuous. Deputy Governor Sarah Breeden has noted that shared ledgers and tokenization could make payments and settlement faster and cheaper, with fewer intermediaries and shorter settlement windows.
However, Project Agorá is distinct from many CBDC projects because it focuses on wholesale rather than retail payments. Wholesale interbank transactions account for the vast majority of value moving through the financial system, and improvements in this area can have outsized economic benefits. By enabling atomic settlement across currencies, the project reduces the need for expensive pre-funding and collateral that currently tie up bank balance sheets.
Comparisons with stablecoins are inevitable, but the BIS has been careful to differentiate its approach. While stablecoins offer speed and programmability, they introduce new risks such as reserve management failures, runs, and fragmentation. The two-tier model of Project Agorá maintains the existing structure of central bank money and commercial bank money, which regulators see as safer and more aligned with monetary policy implementation. Moreover, the involvement of central banks ensures that the system is compliant with local laws and can be integrated into existing regulatory frameworks.
Despite its promise, widespread adoption of such a system will require significant coordination among central banks, commercial banks, and technology providers. The governance frameworks are not trivial; issues of liability, data access, and dispute resolution need to be resolved. The BIS report acknowledges these challenges and calls for continued research and dialogue.
The success of Project Agorá could accelerate the development of a new global payment rail that is faster, cheaper, and more transparent than anything available today. It also demonstrates that central banks are willing to experiment with cutting-edge technology to solve real-world problems, even if full implementation remains years away. As the world moves toward 24/7 financial markets and increasing digital integration, the ability to settle cross-border payments in seconds rather than days could become a competitive necessity.
Source: Cointelegraph News