The Bank for International Settlements (BIS) and a group of major central banks and commercial financial institutions have announced they are moving from simulations to live trials of tokenized digital currency settlements. Participants include the Federal Reserve Bank of New York, the Bank of England, the Bank of Japan, the Swiss National Bank, and several large commercial banks. The Bank of Canada also joined earlier this week.
Atomic swaps eliminate counterparty risk
Research findings show that tokenizing both central bank reserves and commercial bank deposits could enable atomic swaps between different national currencies. Under an atomic settlement mechanism, a payment executes only when both parties approve simultaneously and unconditionally, eliminating the risk that one side completes the transaction while the other fails. Traditional cross-border transfers often pass through numerous intermediary banks and can take several days, whereas a tokenized model promises faster and more secure transfers.
BIS stated that tokenization through atomic settlement can “substantially reduce operational risk in cross-border payments.” The pilot involves selected currencies and financial institutions, aiming to address common pain points such as delays, high costs, and repetitive transactions in conventional cross-border payments.
Industry players accelerate tokenization infrastructure
Beyond central bank tests, key market participants are ramping up their own tokenization efforts. US clearing giant DTCC is building settlement infrastructure for tokenized equities, ETFs, and US Treasury bonds. Meanwhile, Nasdaq and Intercontinental Exchange (owner of the New York Stock Exchange) continue developing blockchain-based tokenization systems. The table below outlines the roles of major institutions:
| Institution | Role in Project | Area of Tokenization |
|---|---|---|
| DTCC | Settlement infrastructure provider | Stocks, ETFs, bonds |
| Nasdaq | Market infrastructure developer | Tokenized equities |
| Intercontinental Exchange | Exchange owner and software developer | Tokenized securities |
BIS warns on stablecoins, urges faster regulation
Known as the “central bank of central banks,” BIS has taken an increasingly active role in blockchain and tokenization. However, its latest report also raised concerns about stablecoins — digital assets pegged to fiat currencies and issued by private companies. BIS warned that the expanding stablecoin market could bring risks to traditional finance and urged regulators to “update rules to keep pace with emerging threats.”
The live settlement test marks a significant step from theory to practice for central bank digital currencies and tokenized assets, while the simultaneous caution on stablecoins underscores the need for balanced oversight.