The Bank for International Settlements (BIS) has unveiled the initial six initiatives slated for development by its Innovation Hub in 2024, following the completion of 12 projects in 2023 and with eight others still in progress. The forthcoming projects will center on key areas such as cybersecurity, combating financial crime, central bank digital currencies, and sustainable finance.
One of these endeavors, known as Project Leap, will concentrate on fortifying payment systems against potential quantum computer threats. Another initiative, Project Symbiosis, will harness artificial intelligence and big data to enhance emissions tracking within supply chains.
Cecilia Skingsley, the Head of the BIS Innovation Hub, expressed anticipation for the upcoming year, emphasizing collaboration with central banks, international entities, and other partners.
Project Aurum will delve into privacy concerns related to the design of central bank digital currencies. Meanwhile, Project NGFS Data Directory 2.0 aims to enhance the data platform of the Network for Greening the Financial System to facilitate easier access to climate-related financial data.
Furthermore, Project Promissa will explore the tokenization of promissory notes and financial instruments used to support international institutions through distributed ledger technology. Project Hertha seeks to leverage network analytics to identify patterns of financial crime in real-time payment systems.
Overview of Projects for 2024
- Project Leap (Eurosystem Centre): Phase II will focus on safeguarding payment systems against potential quantum computer threats.
- Project Symbiosis (Hong Kong Centre): Will investigate the use of AI and big data for emissions tracking in supply chains, with a focus on Scope 3 emissions.
- Project Aurum (Hong Kong Centre): A new phase will examine privacy aspects of retail CBDC payments.
- Project NGFS Data Directory 2.0 (Singapore Centre): A revamp of the data directory platform of the Network for Greening the Financial System for enhanced usability.
- Project Promissa: Assessing the feasibility of tokenizing paper-based promissory notes to support international financial institutions.
- Project Hertha (London Centre): Utilizing network analytics to detect financial crime patterns in payment systems.
Skingsley emphasized the importance of tokenization and safety in financial services, aligning with the principles established by the G20 countries.
BIS highlighted its Innovation Hub’s execution of nearly 30 projects across diverse technological domains relevant to central banking in the past four years. It clarified that the experimental nature of these projects aims to explore the feasibility of various applications rather than endorse specific technologies.
BIS Insights on FX Derivatives and Cryptocurrencies
In July, BIS informed the Group of Twenty that cryptocurrencies cannot serve as a monetary instrument due to inherent structural deficiencies. Subsequently, in October, global banking regulators, including BIS, proposed standardized crypto asset disclosure requirements for major banks starting January 2025 to enhance transparency.
The realm of complex financial instruments witnessed growth as well. BIS reported a surge in over-the-counter (OTC) derivatives volumes in November, attributed to interest rate fluctuations and the phase-out of LIBOR benchmark rates. Notably, OTC interest rate derivatives rose by 17%, while FX derivatives saw a 12% increase.
Moreover, in November, BIS launched a Data Portal to enhance the accessibility and availability of international banking statistics and financial indicators, marking a significant stride in financial data accessibility.
BIS has been actively engaged in shaping policies and infrastructure for the evolving global financial landscape, from scrutinizing cryptocurrencies to advocating transparency reforms and monitoring intricate securities to uphold stability and integrity.
