A special chapter of the BIS Annual Economic Report 2023 details a blueprint for the future by rethinking the existing pillars of the current monetary system. A unified ledger would combine tokenised forms of central bank digital currency (CBDC) with tokenised bank deposits and other tokenised claims, opening up a new era in the joint development of the monetary system and the economy.

Hyun Song Shin, economic adviser and head of research of the BIS, comments: "We are at the cusp of another major leap in the monetary and financial system, which will have far-reaching consequences for the economy and society at large. Bringing together central bank money, commercial money, and different assets on the same platform, all tokenised and interacting, opens up a whole new range of possibilities. This would be a game-changer in how we think about money and how transactions take place."

Examples of possible innovations cited by the report include:

• New methods for securities settlements that combine all the individual steps into one seamless transaction.
• Tokenised deposits with built-in regulatory checks that simultaneously settle in wholesale CBDC.
• Smart contract-enabled credit that reduces the cost of trade finance for smaller companies, improving global supply chains.
• Enhanced sharing of data on potential borrowers, using privacy-protecting technology, to expand access to credit for disadvantaged segments of the population.

Says Song Shin: "The benefits would be limited only by the ingenuity of the public and private partners who innovate on the platform. The gains are not just incremental improvements. They address in a more fundamental way the incentive and informational problems that have stood in the way of better economic arrangements."