On 21 October 2024, the Committee on Payments and Market Infrastructure (CPMI) issued a report on tokenisation.

The purpose of this report is to describe ways that tokenisation may affect the functioning of regulated financial markets. It critically analyses opportunities, challenges and risks, and identifies the most relevant implications for central banks and, more broadly, for the global financial system. For the purposes of the report, tokenisation is defined as the process of generating and recording a digital representation of traditional assets on a programmable platform.

In its conclusion the report notes, among other things, that the risks that apply to conventional market infrastructures also apply to token arrangements, such as governance, legal, credit and liquidity risks, or custody and operational risks. Such risks may materialise in a different manner due to the notable features of tokenisation. For example, risks may arise due to the separation of the token and the underlying asset, which may give rise to conflicts of interest, and to the governance costs of developing, operating and maintaining shared ledgers. The report also notes that challenges arise due to the integration of functions within platforms, which may further introduce conflicts of interest. Moreover, market participants may lack incentives to create interoperability between platforms, due to network effects and incentives to gain market power.

Furthermore, the report concludes that a primary consideration for central banks is whether, and to what extent, to react to ongoing private sector tokenisation initiatives. Other consideration include:

  • Whether and how central banks assess the trade-offs and the appropriate balance between different types of settlement assets in token arrangements.
  • Identifying token arrangements that may already, or potentially in the future, meet the criteria to be subject to regulation, supervision and oversight at the individual jurisdiction level.
  • The potential impact of token arrangements on monetary policy implementation, for example through changes in the structure of regulated markets or the demand for central bank versus other types of money.