Speaking in Singapore today, Agustin Carstens, General Manager of the Bank for International Settlements (BIS), discussed a unified ledger that supports central bank digital currency (CBDC), tokenized bank deposits, and digital assets. At the same time, he says that there are serious questions about how stablecoins work as money.

In the middle of last year, the BIS published a document along the same lines. The unified ledger concept sounds similar to Citi’s idea of ​​a Regulated Liability Network (RLN), which now has interest from the New York Federal Reserve, SWIFT, BNY Mellon, Wells Fargo, HSBC, and a number of other institutions.

Carstens was optimistic about blockchain features such as smart contracts that support programmability and composition, the ability to create complex solutions from someone else’s work in a similar way to open source code.

“Programmability and composability do not require permissionless or decentralized platforms. All of the potential benefits I just described can be achieved on permissioned platforms with various degrees of centralization,” Carstens said.

“CBDCs and tokenized deposits do not represent new types of money. Instead, they replicate existing forms of money in a technologically superior way.

He envisions existing CBDC and tokenized deposits in separate partitions of the unified ledger. He gave himself the example of money deposited as a guarantee for the purchase of a house. A smart contract could lock in the buyer’s money and automatically release it as soon as the process is complete. Commercial banks may not be thrilled to hear Carstens suggest payment be made in central bank digital money.

In addition to the tokenization of bank deposits, the BIS is adopting the tokenization of other assets.

“Tokenization” could make buying, selling, and transferring assets faster, cheaper, and more transparent. In fact, it could even make the delayed liquidation of different assets like bonds, stocks, and currencies a thing of the past. The level of certainty in the financial markets would increase markedly,” said Carstens. And that certainty could significantly reduce the risks.

Speaking of stablecoins, he said that institutional arrangements and social conventions underpin the resilience of fiat money rather than technology. He sees stable institutions as deficient because they are not settled in central bank money or enjoy lender-of-last-resort support. However, the USDC stablecoin could look terribly like a CBDC if he uses Fed reverse repos as he plans to.

Tokenized bank deposits have a key benefit that is rarely emphasized, even by Carstens. Many banks compete around the world, with 30 that are globally systemic. Once stablecoins mature, there are likely to be many smaller ones, which is dangerous for stability. That’s similar to Google dominating search and Facebook being the top social network.