The Bank for International Settlements (BIS) released a landmark report on Wednesday detailing the successful conclusion of Project Agorá, an experimental prototype for cross-border wholesale payments that settles transactions in seconds. The project, which spanned two years and involved seven central banks alongside more than 40 regulated financial institutions, demonstrates how tokenization can dramatically accelerate international payments while reducing credit and settlement risk.
Project Agorá represents one of the broadest collaborations to date between central banks and private lenders, exploring the potential of tokenized central bank reserves and commercial bank deposits to modernize the global payments infrastructure. The initiative was convened jointly by the BIS and the Institute of International Finance, targeting the slow and costly nature of international transactions that continue to burden global trade and financial activity.
Key Findings and Architecture
The report highlights that the prototype enables settlement in seconds once liquidity is locked, using atomic settlement where all balance updates occur simultaneously or not at all. This approach eliminates counterparty risk and ensures finality, a significant improvement over current systems that often take days to settle cross-border transactions.
Project Agorá utilizes a two-layer blockchain architecture. The first layer consists of tokenized central bank reserves held on jurisdictional ledgers, while the second layer features tokenized commercial bank deposits on a shared unifying ledger. This design preserves what the BIS calls the "two-tier banking system" and safeguards the "singleness of money," which the institution considers fundamental to financial stability. By maintaining these traditional structures, the project distinguishes itself from stablecoin alternatives that often bypass established banking frameworks.
The platform also introduces parallel processing for anti-money laundering, sanctions, and fraud screening. Instead of conducting these checks sequentially as in current systems, the new approach allows institutions to perform them simultaneously. The BIS notes that this could significantly reduce the high false-positive rates that plague today's cross-border payment systems, where legitimate transactions are often erroneously flagged and delayed.
Scale of Cross-Border Payments
The urgency of modernizing cross-border payments is underscored by the sheer volume of transactions. According to FXC Intelligence, cited in the report, cross-border payments totaled $195 trillion in 2024 and are projected to reach $320 trillion by 2032. These massive flows support global trade, remittances, and financial market activity, yet they remain hindered by slow processing times, high costs, and operational complexities.
Current wholesale cross-border payments rely on a web of correspondent banking relationships, each requiring separate agreements, liquidity management, and compliance checks. This fragmented system leads to settlement delays that can stretch over days, particularly when operating hours across jurisdictions do not align. Project Agorá's platform is designed to operate around the clock, mitigating these delays and enabling near-instantaneous settlement regardless of time zones.
Real-Value Testing and Future Development
The project is now advancing to real-value testing, where actual transactions involving certain currencies and participants will take place. However, the BIS did not provide a specific timeline for implementation, indicating that further development is needed in several areas.
The report identified key areas requiring additional work: liquidity saving mechanisms to optimize the use of reserves, cybersecurity posture to protect the platform from threats, and governance frameworks covering settlement finality, data governance, and risk management. These elements are critical for ensuring the system's resilience and regulatory compliance before widespread adoption.
One of the most promising features of Project Agorá is its transparency. The BIS report states that all parties to a transaction have access to real-time payment status, while maintaining privacy from non-participating entities. In the future, this visibility could be extended to end users, including debtors and creditors, providing unprecedented insight into the status of cross-border payments.
Participating Central Banks and Broader Context
The participating central banks 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 via its New York Innovation Center, and the Bank of England. This diverse group reflects the global interest in modernizing payment systems and exploring the potential of distributed ledger technology.
Earlier this month, the Bank of England proposed extending settlement hours for its RTGS and CHAPS systems as part of a broader push toward near-24/7 settlement. Deputy Governor Sarah Breeden noted that shared ledgers and tokenization could make payments and settlement faster and cheaper, with fewer intermediaries and shorter settlement windows. These initiatives align with Project Agorá's vision of a more efficient global payment infrastructure.
Background on Tokenization and Central Bank Digital Currencies
Tokenization, the process of representing real-world assets as digital tokens on a blockchain, has gained significant traction among central banks and financial institutions. Unlike cryptocurrencies that operate outside traditional systems, tokenized central bank reserves and commercial bank deposits maintain the legal and regulatory frameworks that underpin modern finance.
The BIS has been at the forefront of exploring these technologies through various innovation projects. Project Agorá builds on earlier work such as Project mBridge, which focused on multi-central bank digital currency (CBDC) platforms for cross-border payments, and Project Dunbar, which examined shared ledger architectures for international settlements. However, Project Agorá is distinct in its emphasis on incorporating private sector participation and preserving the two-tier banking system.
The two-tier system, where central banks issue reserves and commercial banks create deposits, is considered fundamental to financial stability because it allows central banks to implement monetary policy while commercial banks facilitate lending and payment services. Stablecoins, by contrast, often bypass this system, raising concerns about potential disintermediation of banks and risks to financial stability.
Technical Details and Operational Benefits
From a technical standpoint, the prototype uses atomic swap mechanisms to ensure that settlement occurs only when all conditions are met. This eliminates the need for complex netting arrangements and reduces the credit exposure that counterparties face during the settlement window. The platform also supports smart contracts to automate compliance and payment logic, further streamlining operations.
The parallel compliance screening mentioned earlier is achieved through a shared ledger that allows all participating institutions to access the same set of transaction data. This reduces duplication of effort and speeds up the overall process. Current systems often require each correspondent bank to independently screen transactions, leading to redundant checks and delays.
The BIS report also highlights the potential for liquidity savings. By locking funds only when a transaction is ready to settle, the platform minimizes the amount of idle reserves that banks must hold in different currencies. This could free up billions of dollars in trapped liquidity, making the system more efficient and cost-effective.
Challenges and Next Steps
Despite its promising results, Project Agorá faces several challenges before it can be deployed at scale. Governance is a key concern, as the platform spans multiple jurisdictions with different legal frameworks. Settlement finality—the point at which a transaction becomes irrevocable—must be clearly defined and legally enforceable across all participating countries. Data governance is also critical, as the platform must balance transparency with privacy, ensuring that sensitive commercial information is not exposed to unauthorized parties.
Cybersecurity is another major focus. The system must be resilient to attacks, given the high value of the transactions it processes. The BIS notes that ongoing improvements in this area will be essential, particularly as the system potentially expands to include more participants and higher transaction volumes.
The involvement of the Federal Reserve Bank of New York is particularly significant, as the United States is the largest economy in the world and the dollar dominates global trade and finance. The Federal Reserve's participation signals that U.S. authorities are actively exploring these technologies, even as debates about CBDCs and digital currencies continue domestically.
Looking ahead, the BIS plans to continue its work on Project Agorá, with a focus on the areas identified in the report. The real-value testing phase will provide critical insights into the operational and practical challenges of implementing such a system in the real world. If successful, Project Agorá could serve as a blueprint for modernizing the global payment infrastructure, reducing costs, increasing speed, and enhancing transparency for the trillions of dollars that flow across borders every year.
Source: Cointelegraph News