Project Promissa: tokenisation of promissory notes

The G20 has endorsed a roadmap towards better, bigger and more effective multilateral development banks (MDBs) (G20 (2024)). This roadmap, supported by the heads of 10 MDBs, aims to reform these institutions to address regional and global challenges more effectively (World Bank (2024a)). The roadmap, among other recommendations, provides suggestions to enhance MDBs' financing capacity. 

Independently, but aligned with the roadmap goals, the BIS Innovation Hub, World Bank and Swiss National Bank are exploring how to make the funding processes of MDBs fit for the 21st century. Today, MDBs fund their activities in various ways, including through member subscriptions and contributions, which are usually paid in cash or by paper-based promissory notes. MDBs leverage these funds by issuing bonds or other financial instruments to expand their financing capacity. However, the current manual processes associated with the lifecycle events of paperbased promissory notes, such as issuance, encashment, updates and archiving, are time-consuming, cumbersome and require constant reconciliation. 

Project Promissa reimagines the management of promissory notes by digitising financial commitments and putting them on a distributed ledger – a process known as tokenisation. The project built a proof of concept (PoC) platform for tokenised promissory notes, exploring several key features: 

• Single source of truth – ensures real-time access to the true state of a promissory note (golden record)
• Multiparty signatures – to automate the manual handling of lifecycle events
• Confidentiality – ensures that records of the promissory notes are shared exclusively with the involved parties
• Sovereignty – preserves each party’s ownership, control and decision-making authority over their promissory notes.

Project Promissa thoroughly examined technical feasibility and legal aspects in collaboration with central banks, ministries of finance and MDBs. The test results indicate that the PoC effectively addresses key pain points and provides value to all parties, pending further evaluation of the identified legal aspects. 

The benefits demonstrated by the PoC have motivated project participants to consider the potential operationalisation of this solution. To this end, three areas require further work. First, the solution must meet additional requirements such as enabling individual access with appropriate controls (eg the four-eyes principle), handling unexpected situations or errors (“unhappy paths”), and offering ways to integrate with existing recordkeeping and payment systems. Second, the legal and compliance aspects of tokenising promissory notes must be further examined in each jurisdiction. Third, there needs to be a clear plan for who will run the platform, who will pay for it and how it will be managed.