- Project Promissa explored how to manage the financial commitments of member countries to multilateral development banks (MDBs) more efficiently.
- The project developed a proof-of-concept (PoC) platform for tokenized promissory notes, which could replace the current paper-based notes and automate many manual processes.
- The experiment demonstrated that the PoC is technically feasible and could provide substantial cost savings for MDBs, central banks, and Ministries of Finance alike.
Project Promissa, a collaboration between the Bank for International Settlements’ Innovation Hub, the Swiss National Bank, and the World Bank, has demonstrated that paper-based promissory notes can be redesigned using distributed ledger technology (DLT) to address operational challenges that make the process time-consuming and cumbersome.
A promissory note is a financial instrument that contains a written and signed commitment by one party to pay a specified sum of money to another over a predetermined period.
Since their creation, MDBs like the World Bank and others have used promissory notes to track and encash multi-year financial commitments from member countries in a process that is overly complicated and requires constant reconciliation. The volume of promissory notes across MDBs is significant, representing a substantial portion of contributions pledged by member countries.
Project Promissa developed a proof-of-concept (PoC) platform for tokenized promissory notes, enabling more efficient management of the notes throughout their lifecycle, from issuance to payment and archiving, thereby automating manual processes and reducing time and costs.
“Project Promissa is a clear example of how blockchain can be used for the public good. Paper-based promissory notes have been in place since the Bretton Woods institutions were established, helping to finance their important activities worldwide,” said Morten Bech, head of the BIS Innovation Hub’s Swiss Centre, in a statement. “The digital solutions tested by Promissa represent a significant step forward in modernizing this process in a cost-effective manner.”
The DLT platform ensures users have a single source of truth, enables multiparty signatures and guarantees confidentiality while maintaining each party’s ownership, control and decision-making power over its promissory notes. Participants from seven countries contributed to the testing and gave feedback to improve the PoC. The International Monetary Fund participated as an observer.