A new report by the Committee on Payments and Market Infrastructures (CPMI) sets out a list of criteria for developers and market participants to consider when designing digital tokens for use in wholesale transactions.
The Wholesale digital tokens report describes the potential innovations and design questions associated with digital tokens that could be used to settle wholesale, or large-value, payments, made possible by new technologies such as blockchain, or distributed ledger technology.
Private developers are exploring several applications for wholesale digital tokens. While these could be developed simply to make payments, many initiatives also seek to provide the payment leg of tokenized securities and FX transactions, where a token represents a share, bond or other financial asset.
The report only covers variants of digital tokens issued by identifiable issuers and denominated in sovereign currency. It is not directed at so-called “stablecoins” for retail payments.
Benoît Cœuré, Chair of the CPMI, said: “This report outlines useful considerations for token designers. However, there is no single roadmap for success. Success will depend on whether wholesale digital tokens can provide both improved safety and increased efficiency over the traditional account-based settlement assets used today.”
The report describes the critical elements of wholesale digital token arrangements and discusses some potential design choices. It also includes a non-exhaustive list of questions that token developers may need to consider. Important considerations include availability, issuance and redemption, access, underlying assets/funds and claims, transfer mechanism, privacy and regulatory compliance, and interoperability.