Wholesale digital tokens

CPMI Papers  |  No 190  | 
12 December 2019

Traditionally, wholesale transactions are settled by updating balances in account records on a centralised register such as the ledger of a settlement institution. However, new technologies, such as distributed ledger technology, make it possible to create digital tokens that could potentially be used to effect settlement. This report focuses on the role of digital tokens as a means of settling wholesale transactions.

Several potential applications for wholesale tokens are being explored by the private sector. While wholesale tokens could be developed simply for use as alternative payment arrangements, much current work relates to supporting potential new digital token arrangements or platforms in which wholesale tokens would be used for the payment leg of transactions involving other digital assets, including tokenised securities, and even different tokenised currencies. At the current stage of development, it is still unclear what design choices private sector developers will make or what use cases may be adopted.

This report discusses some potential design choices and 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. Depending on the design choices made, there could be a number of implications for safety and efficiency of the token arrangement.