BIS: wholesale digital tokens need to be safe, not just efficient

Last week the Bank for International Settlements (BIS) published a report about “wholesale digital tokens”. These tokens or digital currencies could be backed by central bank money, commercial bank money or other safe assets. The BIS loosely defines wholesale tokens as digital assets used for large-value payments between financial institutions. The paper provides almost 50 questions to assess a token. The authors say the queries are for token developers, perhaps for when they submit applications to authorities. But additionally, it could become a risk assessment checklist for potential token holders. The report notes that in many cases, digital currencies are proposed for the settlement leg of transactions involving other digital assets. For example, a security transaction could use a token for immediate payment in a Delivery versus Payment transaction. Banks often cite benefits such as efficiency and the ability to cut out intermediaries in the form of central counterparties. But the BIS, or its Committee on Payments and Market Infrastructures, emphasizes the need also to be safe.

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