The Bank for International Settlements Innovation Hub published a report summarising work by a dedicated group of seven central banks and the BIS on how tokenisation and distributed ledger technology (DLT) could improve the settlement of large-value transactions between commercial banks while preserving the two-tier monetary system and the “singleness” of money anchored by central bank reserves. The analysis highlights potential new capabilities such as programmability, composability and atomic settlement, and organises the policy discussion around three design questions. These are the relative roles of private sector (commercial bank-led) settlement versus central bank solutions, with central bank-led approaches potentially better suited to avoiding credit and liquidity risk and to meeting public policy goals such as neutrality, cost and liquidity efficiency, market-wide reach, harmonisation and competition. It also contrasts fully integrated settlement platforms, which can combine money and asset settlement on a single programmable platform (enabling atomic settlement) but may be more complex and raise issues like liquidity fragmentation, with synchronised approaches that coordinate transfers across separate systems and are simpler but offer less utility. Finally, it considers the involvement of third parties in building or operating infrastructures that include central bank reserves, noting potential benefits but stressing the need for central banks to retain appropriate control given the systemic nature of settlement and the importance of robustness and disaster recovery.

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