Finternet - The Financial System of The Future. (BIS Working Paper)

BIS Working Papers
No 1178
Finternet: the financial
system for the future
by Agustín Carstens and Nandan Nilekani
Monetary and Economic Department
April 2024
JEL classification: E42, F33, G21, G23.
Keywords: payment systems, financial system, financial

intermediaries, financial instruments, currency, digital
innovation, unified ledgers, tokenisation.
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for
International Settlements, and from time to time by other economists, and are published by the Bank. The
papers are on subjects of topical interest and are technical in character. The views expressed in them are
those of their authors and not necessarily the views of the BIS.
This publication is available on the BIS website (www.bis.org).
© Bank for International Settlements 2024. All rights reserved. Brief excerpts may be reproduced or
translated provided the source is stated.
ISSN 1020-0959 (print)

ISSN 1682-7678 (online)
Finternet: the financial system for the future
Agustín Carstens and Nandan Nilekani1, 2
Abstract
This paper lays out a vision for the Finternet: multiple financial ecosystems interconnected with each other,
much like the internet, designed to empower individuals and businesses by placing them at the centre of
their financial lives. It advocates for a user-centric approach that lowers barriers between financial services
and systems, thus promoting access for all. The envisioned system leverages innovative technologies such
as tokenisation and unified ledgers, underpinned by a robust economic and regulatory framework, to
dramatically expand the range and quality of financial services. This integration aims to foster greater
participation, offer more personalised services and improve speed and reliability, all while reducing costs
for end users. Most of the technology needed to achieve this vision exists and is fast improving, driven by
efforts around the world. This paper provides a blueprint for how key technical characteristics like
interoperability, verifiability, programmability, immutability, finality, evolvability, modularity, scalability,
security and privacy can be incorporated, and how varied governance norms can be embedded. Delivering
this vision requires proactive collaboration between public authorities and private sector institutions. The
paper serves as a call for action for these entities to establish a strong foundation. This would pave the
way for a user-centric, unified and universal financial ecosystem brought into the digital era that is
inclusive, innovative, participatory, accessible and affordable, and leaves no one behind.
Keywords: payment systems, financial system, financial intermediaries, financial instruments, currency,
digital innovation, unified ledgers, tokenisation.
JEL classification: E42, F33, G21, G23.
1
Carstens: Bank for International Settlements (BIS), Nilekani: Unique Identification Authority of India (UIDAI) (Aadhaar) and
Foundation for Interoperability in the Digital Economy (FIDE). The views expressed are those of the authors and not necessarily
those of the BIS, UIDAI or FIDE.
2
We would like to acknowledge the invaluable assistance of Iñaki Aldasoro, Jose Aurazo, Miguel Diaz, Jon Frost, Daniel Rees,
Siddharth Shetty and Pramod Varma in the preparation of this paper. We would also like to thank Morten Bech, Jill Forde,
Rodney Garratt, Priscilla Koo Wilkens, Hyun Song Shin and Cecilia Skingsley for helpful comments and discussions. We thank
Mario Barrantes, Giulio Cornelli and Cecilia Franco for support with graphs and diagrams. GPT-4 was used in Box A, Box C, Box
D and Section 3.2 of this paper to assist with framing text and for summarising.
Finternet: the financial system for the future i

Contents
Finternet: the financial system for the future ......................................................................................................................... 1
Abstract ................................................................................................................................................................................................... i
1. Introduction ...................................................................................................................................................................... 1
Box A: Now is the right time for the Finternet....................................................................................................................... 3
2. A vision for a more technologically advanced financial system................................................................... 4

2.1 Shortcomings of the current financial system....................................................................................................... 4
Speed: the financial system is too slow ................................................................................................................. 4
Costs: the financial system is too costly................................................................................................................. 5
Access and availability: the range of financial services and products is too limited............................ 5
2.2 Technology-driven opportunities............................................................................................................................... 7
Box B: Fast payment systems: lessons for digital public infrastructure ....................................................................... 8
2.3 The Finternet: a vision for the future financial system ..................................................................................... 10
Box C: Lessons from digital public infrastructure in India ............................................................................................... 11
3. From vision to reality ................................................................................................................................................... 12

3.1 Unified ledgers as a vehicle for an improved financial system..................................................................... 12
Box D: Use cases of unified ledgers and tokenisation ...................................................................................................... 17

3.2 The nuts and bolts of the Finternet ......................................................................................................................... 18
User-centric Finternet.................................................................................................................................................. 18
Box E: Advances in cryptographic and ledger technologies .......................................................................................... 26

Tracking fraud ................................................................................................................................................................ 25
Fraud at entry: preventing unauthorised access .............................................................................................. 25
Fraud once within the system: safeguarding against internal threats ..................................................... 25
Addressing social engineering attacks ................................................................................................................. 26
Effective implementation of the technology will be driven by use cases that benefit society ...... 28
3.3 Regulatory and legal considerations....................................................................................................................... 28
4. Design principles ........................................................................................................................................................... 30

Principle #1: Users at the centre ............................................................................................................................. 30
Principle #2: Interoperability .................................................................................................................................... 30
Principle #3: Evolvability............................................................................................................................................. 30
Principle #4: Modularity ............................................................................................................................................. 30
Principle #5: Scalability ............................................................................................................................................... 31
Finternet: the financial system for the future iii

Principle #6: Division of labour and competition ............................................................................................. 31
Principle #7: Inclusiveness and accessibility ....................................................................................................... 31
Principle #8: Security and privacy ........................................................................................................................... 31
5. Conclusion ....................................................................................................................................................................... 31
Box F: Brazil’s Drex: putting the unified ledger into practice ......................................................................................... 32
Box G: Contributions from the BIS Innovation Hub to an architecture for unified ledgers ............................... 33
Glossary ............................................................................................................................................................................................... 34
References .......................................................................................................................................................................................... 36
iv Finternet: the financial system for the future

1. Introduction
In recent decades, advances in digital technology have transformed our lives. We see the consequences
everywhere: in the way we shop, in how we consume news and entertainment and in our interactions with
friends, family and colleagues. Tasks that were once expensive, complex and time-consuming, like making
an overseas phone call or booking a hotel room in an unfamiliar city, can now be done with the flick of a
finger.
Glimpses of the potential of digital innovation are also apparent in the financial system. The
widespread deployment of mobile and fast payment systems has made the act of buying goods and
services – perhaps the most ubiquitous financial transaction – easier, cheaper and more secure. Meanwhile,
in some jurisdictions, verifiable digital identity systems have helped hundreds of millions of people to open
bank accounts, build savings, insure themselves and access loans for the first time.
But there are too few of these examples. Large swathes of the financial system are stuck in the
past. Many transactions still take days to complete and rely on time-consuming clearing, messaging and
settlement systems. Some even involve physical paper trails. Even within countries, a lack of adaptive
interconnectedness means that different parts of the financial system often do not talk to each other. The
barriers to transactions that cross national borders are larger still.
The failure to develop a modern financial system has many costs. Some are visible: transferring
assets takes too long, fails too often and costs too much. Others are hidden: beneficial activities do not
take place, and access to financial services is needlessly limited by a financial system dominated by legacy
systems.
The costs of an antiquated financial system are particularly stark in emerging market and
developing economies (EMDEs). For many of their residents, financial services are not merely sub-standard,
but not available at all. As a result, they still use cash as their only means of payment, borrow from informal
sources and save their money “under the mattress”. Lack of access to financial services prevents people
from increasing their incomes, improving their skills, expanding their opportunities and making full use of
the digital economy.
To build a financial system fit for the future, we need to agree on the vision we want to achieve.
In this paper, we propose the concept of the “Finternet”: multiple financial ecosystems interconnected with
each other, much like the internet, designed to empower individuals and businesses by placing them at
the centre of their financial lives. It would lower barriers between different financial services and systems,
drastically reducing the complex clearing and messaging chains and other frictions that hinder today’s
financial system. According to our vision, individuals and businesses would be able to transfer any financial
asset they like, in any amount, at any time, using any device, to anyone else, anywhere in the world.
Financial transactions would be cheap, secure and near-instantaneous. And they would be available to
anyone, ensuring financial inclusion by meeting the needs of currently underserved segments of the
population. Compared with what is available today, the Finternet would offer broader access, better risk
management, increased information availability and lower transaction costs. New, personalised financial
services would emerge, fostering more “complete” markets and improving welfare.
Such a vision is ambitious. Some aspects may be unattainable. But the potential gains are
enormous. Hence, we should do all we can to turn it into reality.
The good news is that much of the technology to deliver a better financial system is there. We
can represent financial assets – whether they be money, shares, bonds, real estate or insurance contracts –
in digital form. We can send those assets around the world with the push of a button. And we can use
digital tools to verify instantaneously and with certainty that the individuals and businesses involved in
transactions comply with all relevant laws and regulations.
Finternet: the financial system for the future 1

What we lack is the means to bring the various components of the financial system together.
Financial ecosystems contain many moving parts. Individual participants seeking to break down silos and
realise efficiencies face a daunting array of legal, regulatory and institutional hurdles. The benefits of a
more efficient financial system would be distributed broadly, not least to individuals and small businesses
through lower costs, more choice and better services. But the rents from maintaining existing barriers are
quite concentrated. As a result, changes to the financial system, when they are eventually made, tend to
be gradual and piecemeal. Improvements in processes, systems and infrastructure are constrained by the
need to account for legacy architecture where progress has not been so rapid. There is thus a strong
rationale for public authorities to play a catalytic role, working with private sector counterparts to assemble
the complete financial, technological and governance architecture needed to bring the future financial
system into being (see Box A).
“Unified ledgers”, an important building block of the Finternet, are a promising vehicle to turn
our vision of an efficient future financial system into reality. These are digital platforms that bring together
multiple financial asset markets – such as for wholesale tokenised central bank money, tokenised
commercial bank deposits and other tokenised assets, including company shares, corporate or
government bonds and real estate, to name just a few – as executable objects on common programmable
platforms. In doing so, unified ledgers would provide an economic and financial architecture to realise the
full potential of tokenisation and other novel financial technologies, supported by robust legal and
governance arrangements and modern technological underpinnings. Once on a ledger, assets could be
transferred immediately, safely and securely, with less reliance on the external verification processes or
messaging systems that make today’s financial system so costly, slow and, in some cases, unreliable.
Grounded on a digital-first approach and leveraging tokenisation, unified ledgers would improve existing
financial transactions, by making them cheaper, faster and safer. They would also make entirely new
financial products and transactions possible.
While the Finternet, including unified ledgers, offers benefits to all economies, there are particular
benefits in EMDEs. These are the jurisdictions where access to and use of financial and payment products
is currently most circumscribed. And they are the ones where the gains from using new technologies to
broaden participation in economic activity and to provide new opportunities for individuals to invest, to
protect themselves through insurance and to ensure the safe custody of their assets is the greatest.
Bridging the gap between vision and reality will be a challenge. The coordination problems and
vested interests that hinder improvements to existing financial infrastructures will also need to be
overcome to deploy entirely new ones. Institutions looking to foster the development of unified ledgers
and associated financial architectures will need to decide where to start and how to make the inevitable
compromises to get things moving without sacrificing bigger gains in the future. The existence of these
challenges is not cause for delay, however. Rather, it increases the urgency to take the first steps by
experimenting and exploring alternative approaches.
In this paper, we lay out a blueprint to help public authorities and private institutions take the
first step. In Section 2, we first lay out our vision for the Finternet and describe how recent advances in
digital technology could help bring it to fruition. In Section 3, we describe the economic rationale for
unified ledgers – a promising vehicle to turn our vision of the future financial system into reality – as well
as the technical, regulatory and legal building blocks needed to bring the ledgers together. Section 4
proposes eight fundamental design considerations that we feel must be a core part of the Finternet. That
said, we acknowledge upfront that there can be no one-size-fits-all solution. Each jurisdiction will need to
chart its own course to build the Finternet, based on its own laws, regulations and the existing state of the
financial system. Section 5 concludes.
2 Finternet: the financial system for the future

Box A
Now is the right time for the Finternet
The financial services landscape is on the cusp of a transformative shift, influenced by several converging trends. These
promise to reshape how over 8 billion individuals and 300 million businesses access and interact with financial
ecosystems. These trends present both opportunities and challenges, requiring nuanced, forward-thinking policy and
technological frameworks to harness their potential. Throughout history, the convergence of underlying technologies
and trends, like the industrial revolution’s combination of mechanisation, steam power and mass production, or the
digital age’s blend of the internet, GPS and smartphones, has created new innovation playgrounds. This led to seismic
shifts in human society and economic structures. We believe that we stand on the threshold of a similar opportunity
in financial services. This is driven by:
Increasing economic aspirations and participation of individuals and businesses: The rise of the digital age has
amplified the economic aspirations and capabilities of individuals and businesses. It has also heightened expectations
for more accessible, personalised, affordable and efficient financial services. The surge in formalisation of informal
activities, entrepreneurial ventures and market participation reflects the wide range of financial needs and applications.
This expanding landscape of economic activity necessitates a financial system robust enough to support the evolving
and diverse needs of an interconnected, digitally empowered population.
Clear intent from regulatory agencies: There is a clear regulatory intent to harness the potential of financial
innovations in a safe and controlled manner. This is reflected in initiatives like open finance, open banking, tokenisation
of central bank money, digital asset regulation, introduction of fast payment systems and many others across multiple
jurisdictions. While most of these initiatives start with a broader vision, they often become siloed at the time of
implementation. Therefore, there is a need for an architecture that supports a unified approach. This can ensure that
the initial broad vision can be maintained and realised effectively.
Universal access: The proliferation of smartphones and the expansion of internet access are pivotal in democratising
access to financial services, enabling digital applications and allowing user-centric experiences for a wider
demographic. While smartphones and internet connectivity will drive the adoption of digital-first solutions,
applications in the Finternet would be accessible through various means, including feature phones and assisted
modes, ensuring no individual is left behind.
Advances in cryptographic technology: Recent progress in cryptographic methods and technologies has
significantly enhanced the capabilities of financial systems, offering features like programmability, immutability,
composability, interoperability and verifiability. When leveraged well, these technological advances enable more
secure, efficient and seamless interactions across different financial platforms and systems.
Advances in computing and artificial intelligence (AI): AI is set to revolutionise financial services, enhancing
identity verification, fraud management, underwriting and advisory services. Advances in cloud computing and other
computational technologies have enabled the development of sophisticated AI tools. These technologies, including
voice-based interfaces and multilingual experiences, are breaking down traditional barriers, making financial services
accessible to a wider audience, including people with disabilities or non-native language speakers, and ensuring
inclusiveness in the financial ecosystem. The emergence of large language models and other forms of generative AI
is a significant technological advance, with cloud infrastructure playing a crucial role in processing and analysing vast
data volumes. This evolution in AI can transform financial systems, particularly in fraud detection, where AI models
can quickly identify and respond to suspicious activities, enhancing security. Generative AI can streamline many back
office tasks, lowering costs and reducing processing times in activities like document scanning, transcription, data
entry, customer request screening and text summarisation. Additionally, AI’s ability to detect novel data patterns helps
financial institutions better understand customer needs and creditworthiness. It also streamlines compliance
processes, such as know-your-customer checks, reducing costs and improving speed and accuracy.

2. A vision for a more technologically advanced financial system
Financial systems lie at the core of modern market economies. They are the venue where individuals and
businesses save, borrow, invest and insure themselves. When operating efficiently and affordably, financial
systems fulfil two primary objectives. First, they provide a means for individuals to safeguard their financial
well-being. Second, they channel financial resources into generating economic activity, which is vital for
spurring new ideas and innovations. Well-functioning financial systems help to foster growth and
development, in doing so benefiting all members of society. In contrast, poorly functioning financial
systems harm a country’s economic performance and, more importantly, the well-being of its citizens.
It follows that improving the functioning of the financial system is an important public policy
objective. Technological advances could bring the financial system closer to people and businesses at
lower cost and with greater efficiency. But technology alone is not enough. It needs to be combined with
an efficient economic and financial architecture and robust governance and regulatory arrangements. To
assemble all three components, a coherent vision of what the financial system should deliver is essential.
In this section, we first describe what we see as the key shortcomings of today’s financial system.
We then explain how technology could help to overcome many of these shortcomings. Finally, we present
a vision of the future financial system.
2.1 Shortcomings of the current financial system
In many respects, today’s financial system is still serving the past, not the future. It has numerous
shortcomings. Many fall within three broad categories: speed, cost and reduced availability.
Speed: the financial system is too slow

The vast increases in the speed of information flows and communications that have transformed many
aspects of everyday life have not left a commensurate imprint on the financial system. Admittedly, there
have been improvements in retail payments, with the introduction of fast payment systems being notable
examples (Aurazo et al (2024), Bech et al (2020), Frost et al (2024)). But these are the exception. Many
financial asset transactions, such as those involving shares, bonds or real estate, still take days to settle
and, for many individuals, are difficult, if not impossible, to access.
Antiquated clearing, messaging and settlement systems are a significant source of delays. Even
when individuals use sophisticated front-end interfaces to make supposedly “digital” transactions, behind
the scenes, movements of money and other financial assets often rely on the owners of siloed proprietary
databases to initiate and process transfers. These databases often operate with different technical
standards and governance arrangements, connected through third-party messaging systems that may not
interact smoothly with each other.3 In some cases, the exchange of physical contracts is still required.
Particularly in cross-border transactions, differences in time zones and business hours can slow the process
further.
Compliance with regulatory requirements, such as those related to anti-money laundering and
combating the financing of terrorism (AML/CFT) rules, are another source of delay. The regulations
themselves are, of course, critical to deter illicit activity and preserve the integrity and stability of the
financial system. But their implementation is often manual, bespoke and inefficient. For example, the same
verification of customer identity may be repeated several times in a single transaction. The resulting
inefficiencies can fall as heavily upon individuals and businesses making legitimate transactions as they do
3
Some efforts to harmonise messaging standards are currently under way, with the G20 cross-border payments programme
initiative to promote the global adoption of the ISO 20022 message standard being a leading example.

on those making illicit ones. These compliance costs have been increasing rapidly due to the greater
sophistication of criminal threats to the system and rising regulatory expectations.
Costs: the financial system is too costly

Slow transactions are costly ones. Particularly in EMDEs, delays between the execution of trades and their
settlement tie up working capital, forcing businesses to hold large cash reserves or rely on expensive forms
of borrowing like credit cards to tide themselves over. For individuals, long waits for wages and
government transfers to appear in their bank accounts may leave them with no alternative but to seek out
short-term loans, often at high interest rates. Settlement delays also create so-called “counterparty risk”,
ie the risk that one or more participants will not provide the money or financial assets to deliver on their
side of the transaction. To mitigate these risks, participants in financial transactions are often required to
post collateral, which comes with its own associated financial costs.
Manual processes can also lead to errors. Reliance on external verification and messaging systems
means that participants in financial transactions often have an incomplete view of the actions of other
parties and cannot track the progress of their payments in real time. Extensive auditing, compliance and
other back office costs are required to monitor the progress of payments and other financial transactions
and confirm their progress. Errors or inconsistencies in messages between financial institutions may go
undetected and then take time to resolve. This too imposes costs on users of financial services.
Lack of competition is another source of costs. Some of these costs are explicit, in the form of
high prices or fees for services. Such costs can be particularly large for individuals and firms making low-
value transactions or cross-border payments. The cost of sending cross-border remittances, for example,
averages 6.3% of the total cost of the payment (FSB (2023), World Bank (2023)). Other costs are less visible,
such as poor service quality or the handicapping of innovation.
Access and availability: the range of financial services and products is too limited
The combination of slow systems, high costs and a lack of competition ultimately limits the range of
financial services on offer. High costs, for example, can make certain financial services uneconomical in
some locations, especially rural and low-income areas. The contraction of cross-border correspondent
banking networks in recent decades is a prime example. Absence of choice leads individuals to make sub-
optimal decisions, such as maintaining large balances in cash accounts at low interest rates or, as noted
above, relying on expensive forms of credit, like credit cards, for borrowing.
In many cases, a combination of challenging geography and old technology also hinders access
to financial services. In some EMDEs with relatively poor transportation connections, even basic financial
services, like the provision of physical notes and coins, may be lacking (Jahan et al (2019)). The deployment
of digital financial services as a complement to existing ones, accessible through mobile phones and other
electronic devices, offers the prospect of overcoming many of these geographical challenges. But in many
jurisdictions these are still limited to a relatively basic set of financial assets and services.
There are also immense hidden costs in terms of potentially worthwhile transactions and products
that never materialise. To name just one example, trade finance procedures – which can lead to significant
delays between the time when businesses produce goods and services and the time when they receive
payment – could be significantly streamlined through the use of smart contracts to enable conditional, or
partial payment.4 However, such contracts are difficult, if not impossible, to implement in today’s financial
system. This represents a significant deadweight loss of economic opportunity. As a result, markets are
unnecessarily incomplete. And incomplete markets are not conducive to higher welfare.
In the extreme, individuals may be unable to access financial services at all. Despite considerable
progress in recent decades, 1.4 billion adults are still excluded from the financial system (Demirgüç-Kunt
et al (2022)). And even if they have some access, the extent of financial system participation is often limited.
4
See BIS (2023) for a more detailed explanation of the use of smart contracts in trade finance.

According to the World Bank’s Findex database, while 76% of adults had a transaction account, only 55%
owned a debit or credit card and 59% made a digital payment in 2021. Access to credit and savings is even
more constrained, with only 28% of adults borrowing from a formal financial institution and 29% saving
money in the financial system.
Lack of access to financial services is particularly acute in EMDEs (Graph 1.A). Only a quarter of
adults in these jurisdictions use a savings account, and about half borrow – with more than half of this
coming from informal sources (Demirgüç-Kunt et al (2022)). Access to credit or savings products is even
lower in some regions, such as Latin America and the Caribbean (Graph 1.B), and among certain
demographic groups such as those defined by age, gender or education.5 Meanwhile, small businesses in
EMDEs often have insufficient credit for working capital. Lack of retail access to investment and insurance
constrains households from accumulating wealth or building resilience. In most EMDEs, insurance
premiums per capita (“insurance density”) are less than $1,000 per year; premiums relative to GDP
(“insurance penetration”) are less than half the level in advanced economies (AEs) (Graph 1.C).
Access to financial services has improved, but gaps remain Graph 1
A. Gap with AEs is narrowing, but B. Saving or borrowing lag behind C. Insurance density and penetration
more inactive accounts in EMDEs account ownership are low in many regions3
% % USD % of GDP
105 100
8,000 10
90 80
6,000 8
75 60
4,000 6
60 40
2,000 4
45 20
30 0 0 2
13 15 17 19 21
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AEs: EMDEs:
AEs: EMDEs:
Account ownership1
2 Insurance density (lhs)
Made digital payment Insurance penetration (rhs)
Saved at a FI
Borrowed from FI
1
The graph shows the percentage of adults who hold a financial institution or mobile money account. 2 The graph shows the percentage
of adults who hold a financial institution (FI) or mobile money account, who made a digital or debit card payment and saved or borrowed via
financial institution. 3 Insurance density is defined as premium per capita in 2022. Insurance penetration is defined as premium as a
percentage of GDP in 2022. Includes life and non-life premiums (including health).
Sources: World Bank Global Financial Inclusion (Global Findex) Database; Swiss Re Institute; BIS.
The inability to access financial services lowers welfare. Measures of financial health – defined as
the extent to which a person or family can successfully manage their financial obligations and have
confidence in their financial future – are much lower in EMDEs than in AEs (Graph 2.A; Cantú et al (2024)).
Limited access to financial services hinders individuals' ability to manage risks and save for the future
(Dupas et al (2013)). It also impairs small businesses’ ability to invest in productive activities, thus stifling
5
For example, fewer young people aged between 14 and 25 have access to a loan from a financial institution (17%, compared
with 32% of people aged over 25). People with secondary or higher education often have more access than those with less
education (38% vs 18%). Women and men have similar access to credit (28% vs 31%).

growth and development (Banerjee and Duflo (2014)). Ultimately, access to credit and financial services is
instrumental in empowering individuals to escape poverty by investing in human capital and other
income-generating activities and enhancing overall economic inclusion.
The link between financial inclusion and financial health Graph 2
A. Measures of financial health are B. Greater use of financial services C. Digital payments are associated
poorer in EMDEs1 translates into better financial health2 with less informality2
%
90 90
80
(% of total employment)
80 80
Informal labour
60
Health (%)
R-squared=0.717 R-squared=0.522
70 70
40
60 60
50 20
50
40 40 20 40 60 80 0
20 40 60 80 Use of digital payments (% of pop)
EM ced
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Saved at / borrowed from FI (%)

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Median Interquantile range

1 Financial health is estimated as one minus the average fraction of survey respondents that are very worried about medical expenses, saving
for old age, paying bills and affording education or rely on family and friends for funds in case of an emergency. 2 Each dot represents a
country in 2021. The x-axis indicates the average fraction of survey respondents that save or borrow in a financial institution. The y-axis is one
minus the average fraction of survey respondents that are very worried about medical expenses, saving for old age, paying bills and affording
education or rely on family and friends for funds in case of an emergency.
Sources: Aguilar et al (2024); World Bank Global Financial Inclusion (Global Findex) Database; BIS.
2.2 Technology-driven opportunities
Recent technological innovations have the potential to overcome many shortcomings of today’s financial
system.
Some progress has already been made. In many jurisdictions, smartphones have facilitated
payments and lowered transaction costs. Digital identity systems have made it easier and cheaper to open
bank accounts (D’Silva et al (2019)). The use of alternative data, such as those generated by quick response
(QR) payments and fast payments, has underpinned digital credit. This has benefited individuals and small
businesses (Beck et al (2022)) and broadened access to credit by substituting for collateral (Gambacorta
et al (2022), Aurazo and Franco (2024)). Meanwhile, novel retail investment and insurance platforms have
created new pathways to help individuals build wealth and diversify risks. In some countries, fast payment
systems have emerged as a key innovation. The remarkably fast adoption of these systems holds lessons
for other novel financial technologies (see Box B).
The benefits of such innovations are clear. In aggregate, there is a positive correlation between
use of borrowing and savings products and measures of financial health (Graph 2.B). Greater use of digital
payments is associated with less economic informality, ie a smaller share of the “shadow economy”
(Graph 2.C). This may reflect the use of digital payments to merchants, and digital payments for payroll, in
creating a data trail that helps to formalise previously unrecorded (cash-based) activities (Aguilar et
al (2024)).

Box B
Fast payment systems: lessons for digital public infrastructure
Fast payment system (FPS) are now available to households and businesses in around 119 jurisdictions; in others,
authorities plan to implement an FPS in the coming years. The success of FPS in terms of adoption and usage varies
across jurisdictions, as does the role of central banks, which can be a catalyst, overseer or operator.
Recent experiences suggest that certain design features of FPS are particularly important to spur user uptake
(Frost et al (2024)). Thailand’s PromptPay, India’s Unified Payments Interface (UPI) and Brazil’s Pix are three examples
that stand out as they have achieved remarkable success in driving the adoption of digital payments (Graph B1.A),
They have also facilitated private sector innovation and the entry of new payment service providers (PSPs) (Graphs
B1.B and B1.C). These FPS share a number of features: (i) a user-centric design, with a number of use cases; (ii) a robust
infrastructure for settlement; (iii) a rulebook for participation, eg mandatory participation of large banks; and (iv) a
framework for governance that includes a strong role for the public sector, in particular the central bank. In addition,
these FPS include open application programming interfaces (APIs) and aliases (eg mobile phone numbers) to initiate
transactions, and low transaction costs.
Notably, both UPI and Pix allowed room for private sector (non-bank) participation. In fact, UPI payments
(developed by the Reserve Bank of India and the National Payments Corporation of India) only took off when third-
party application providers (now dominant) were allowed to connect in 2018. The private sector played a crucial role
in bringing UPI to the financially excluded, through innovations such as all-in-one quick response (QR) codes and
audio-based payment confirmation, targeted at small merchants in areas with poor internet connectivity. Pix has also
encouraged private sector innovation by adopting standardised APIs specified by the Central Bank of Brazil, which
enabled merchants to integrate Pix payments into their online shopping experience through QR codes. Additionally,
innovators leveraged Pix QR codes to pay for tolls and gain access to private buildings.
These examples highlight the importance of having both regulatory oversight and private sector
participation in achieving public policy goals.
Fast payment systems in India and Brazil Graph B1
A. Transactions per capita show wide B. The launch of UPI has spurred a C. Introduction of Pix has gone hand
UPI and Pix adoption1 rich payments app landscape in hand with more PSPs
Transactions per capita Number of apps Number of PSPs
a b c
32 200
500
24
150
400
16
100
8 300
50
0
0 200
14 15 16 17 18 19 20 21 22 23 2015 2017 2019 2021 2018 2019 2020 2021 2022
Brazil Korea Payment and finance apps in India Number of PSPs in Brazil
Costa Rica Sweden
India Thailand
a
Introduction of UPI 1.0. b
Introduction of UPI 2.0. c
Introduction of Pix.
1
Monthly data.
Sources: Central Bank of Brazil; World Bank; National Payments Corporation of India; Sensor Tower; BIS.
Successful though these innovations have been, their widespread use is still restricted to a small –
though growing – number of jurisdictions. Further gains from broader adoption of these technologies are

still possible. Meanwhile, other technological innovations that have yet to enter the mainstream offer the
prospect of further progress.
Tokenisation is a leading example. Tokenisation involves generating a digital representation of
financial or real assets that reside on a programmable platform (Aldasoro et al (2023)). Traditionally,
financial systems have separated databases – which record claims on financial assets (eg a land title
registry, or a bank’s record of customer deposits) – from the governance rules and applications that allow
users to transact these assets (eg an e-banking app). Tokenisation removes the distinction between the
two as all the information required for the transaction of a financial asset (eg ownership, rules and logic
governing transfers) resides in one place. This greatly simplifies the mechanism for trading assets, while
also enabling more complex pre-programmed and contingent asset transfers, which would not be feasible
in a non-tokenised environment.
Adoption of tokenised financial assets could ease many of the bottlenecks that exist in the current
financial system. Tokenisation fundamentally reshapes the process of financial transactions. Instead of
long, complex sequences of messages passed back and forth between financial institutions, the tokens
themselves trade, along with all of the ownership, value and regulatory information that would typically
be recorded in databases.
While tokenisation does not eliminate the role of intermediaries, it changes the nature of that
role. Intuitively, intermediaries in a tokenised environment primarily serve a governance role, as the curator
of the rules governing the transfer of tokens, rather than as a bookkeeper which records individual
transactions on behalf of account holders. By reducing the dependency on the clearing and messaging
systems, tokenised assets allow for atomic settlement – that is the synchronous and simultaneous
settlement of multiple legs of a single financial transaction – thereby reducing counterparty risk and
lessening collateral requirements. Programmability could also make viable some contingent financial
transactions, which are infeasible in today’s financial system. Tokenisation also provides greater scope for
composability, whereby several transactions are bundled into a single executable package. Features such
as these open the door to the development of entirely new financial products to help individuals and
businesses save, invest and insure themselves. In sum, tokenised financial assets would offer individuals
and businesses faster service, lower costs and greater choice than their traditional alternatives.
The emergence of large language models and other forms of generative artificial intelligence (AI)
is another technological advance that could materially influence the financial system. Application of AI
models could deliver a step change in the volume and types of data that financial institutions can process.
Generative AI, in particular, could streamline many back office tasks, lowering costs and processing times.
For example, scanning, transcribing or verifying documents, data entry, screening customer requests or
summarising texts can all be done more effectively when supported by AI. AI models can locate previously
unidentified data patterns, helping financial institutions to predict the financial needs, or borrowing ability,
of their customers more accurately. Moreover, AI models could also help financial institutions automate
compliance procedures, such as know-your-customer (KYC) checks, greatly reducing their cost while
increasing their speed.
But technology is not an end in itself. The benefits of tokenised assets, and other forms of financial
innovation, are limited so long as the assets exist in isolation. For example, trading a tokenised asset in
exchange for a non-tokenised counterpart would still require a sequence of messages to link the tokenised
and non-tokenised systems. Clearing and settlement could still be subject to lengthy delays and points of
failure. And, if the legal and regulatory framework governing tokenised assets is undeveloped, such a trade
may not even be possible. To unlock the full benefits of tokenisation, it is necessary to bring multiple
tokenised assets together on common platforms, with the backing of a robust governance and regulatory
framework. This, however, is a more ambitious project than simply offering existing financial assets or
services in a more technologically advanced form. Hence, in order to proceed it is necessary to first identify
the tangible objectives one wants to achieve. That is, one needs to pursue a vision for the future financial
system. We next turn to this vision.

2.3 The Finternet: a vision for the future financial system
We introduce the concept of the Finternet as a vision for the future financial system. This vision entails a
network of interoperable financial ecosystems, with individuals and businesses positioned at the centre of
their financial interactions. The system rests on three foundational pillars. These are: (i) an economically
sound architecture; (ii) the integration of advanced technologies; and (iii) a robust regulatory and
governance structure.
The design of the economic architecture should put its users at the centre. Individuals and
businesses should have the greatest possible control over the financial transactions they make, and the
time and way in which they make them. Financial services should be cheap, secure, reliable and easily
accessible.
To fulfil this vision, the financial system will need to make full use of innovative technology to
enhance user experiences. At the same time, it cannot rely on specific technological platforms,
architectures or data standards. Technology will continue to advance, and so the financial system needs
to remain adaptable to technological progress. And within that flexibility it should empower users to
interact with financial services through a range of devices and interfaces. The paper proposes an approach
that integrates essential technological features such as interoperability, verifiability, programmability,
modularity, scalability, security and data empowerment.6 The adoption of the system can occur in stages,
allowing different participants to integrate and go live at their own pace. This phased approach
accommodates the varying readiness and capacities of entities within the ecosystem, ensuring a smooth
transition to the new financial framework.
Promoting user choice also means dismantling the barriers and silos that exist in the current
financial system. Instead of sluggish clearing and messaging systems, minimum transaction values, manual
processes and delayed settlement, individuals should have control over what financial assets they trade,
in what amount and at what time.
An open and efficient financial system should foster robust competition, encouraging new
entrants and keeping existing service providers nimble. This will promote continuous innovation within
the financial industry and lower costs for consumers. To allow users to take full advantage of this
competitive playing field, it will be necessary to ensure that individuals have control over their financial
data, including by supporting multiple verifiable identities to enable enhanced privacy while maintaining
accountability.
Not everything should change. Many of the key underpinnings of today’s financial system, such
as the two-tier structure with a clear role for the public and private sector, should remain in place. Central
bank money should still serve as the trusted foundation of the financial system, with settlement in
wholesale central bank money on the central bank’s balance sheet being the determinant of finality in
financial transactions. Commercial banks should retain a key role as intermediaries between savers and
investors and as providers of commercial bank money. But even in these cases, the assets that these
institutions offer to the public should take on more advanced technological representations, in the form
of wholesale tokenised central bank money and tokenised commercial bank deposits.7
Robust governance will remain essential. To maintain trust in the security and integrity of the
financial system, all participants should comply fully with all regulatory and legal obligations. This includes
measures to safeguard individual privacy and business confidentiality. Here, too, the application of
technology will be a critical enabler of security, speed and efficiency.
Public authorities will play an important role in the future financial system. Through the
development of digital public infrastructure, they can establish the platforms, rulebooks and regulatory
6
See also Nilekani et al (2024).
7
That said, traditional financial assets, including notes and coins, should continue to be available for individuals and businesses
who wish to use them.

protections required to deliver an open and efficient financial system (see Box C for lessons from digital
public infrastructure in India). And, as suppliers of central bank money, they will continue to provide the
foundational asset for the entire monetary and financial system. With this infrastructure and regulatory
base in place, private institutions will have freedom to compete and innovate to deliver better, faster and
cheaper services to their customers.
Box C
Lessons from digital public infrastructure in India
The implementation of digital public infrastructure (DPI) illustrates the profound impact that interoperability, a unified
approach, universality, evolvability, user-centricity and modularity can have on the financial ecosystem. As recognised
by the Global Partnership for Financial Inclusion under the G20, DPIs are instrumental in enhancing the access, usage
and quality of financial services, thus driving innovation and competition. This box provides a brief review of examples
from India (see also Alonso et al (2023), Ardic Alper et al (2019), D’Silva et al (2019) and Tiwari et al (2022)).
Aadhaar: It exemplifies universality and user-centricity through its biometric-based, verifiable identity mechanism
issued to over 1.3 billion individuals. By facilitating a presence-less customer onboarding process, Aadhaar has
reduced transaction costs from $15 to $0.07, thereby extending banking and dematerialised account access across all
segments of society. This infrastructure has significantly accelerated financial inclusion, enabled bank accounts for all,
and bridged traditional gender and age disparities in financial participation within a mere nine years – a task that
would have otherwise spanned several decades.
Unified Payments Interface (UPI): As a hallmark of interoperability and a unified system built by the Reserve Bank
of India and the National Payments Corporation of India, UPI has revolutionised digital payments, enabling
comprehensive transaction modalities across peer-to-peer, peer-to-merchant and government-to-person payments
(see also Box A). UPI’s facilitation of 117.6 billion transactions ($2.2 trillion) in 2023 underscores the scalability of the
digital payment system and the pivotal role of digital payment infrastructures in democratising financial services and
fostering inclusion. Leveraging Aadhaar and digital payments, India’s direct benefit transfers (DBT) have not only
optimised welfare scheme deliveries but also effected substantial fiscal savings by curtailing leakages in excess of $30
billion.
Account Aggregators (AA): The AA system champions user-centricity and modularity, granting individuals and
entities sovereign control over their financial data. This enables individuals to use their data as “digital capital” for
accessing financial services. The facilitation of over $2.4 billion in loans since its launch signals the potential of consent-
based, machine-readable data in broadening financial inclusion and reducing fraud. It is an example of how multiple
financial regulators (the Reserve Bank of India, the Securities and Exchange Board of India, Insurance Regulatory and
Development Authority of India, the Pension Fund Regulatory and Development Authority, and India’s Ministry of
Finance) and market players (through the Sahamati Foundation) came together to enable an interoperable and unified
ecosystem across diverse sectors for the user.
Open Networks: The implementation of Open Transaction Networks (OTNs) for commerce, mobility and other sectors
particularly through the Open Network for Digital Commerce (ONDC), exemplifies the lowering of transaction costs
and barriers to entry, thereby cultivating an environment ripe for innovation, competition and market expansion. The
ONDC, underpinned by the Beckn protocol, is pioneering a significant shift in the transaction economy, demonstrating
how open, protocol-based systems can fundamentally alter market dynamics and foster inclusive growth.
In sum, these DPI components collectively underscore the benefits that can be realised through the strategic
application of the foundational digital principles we highlight in this paper. For policymakers, these examples offer
compelling evidence of the dramatic and far-reaching success that can be achieved in financial inclusion and the
broader economic landscape through the thoughtful implementation of digital infrastructure.

3. From vision to reality
How can we transform the vision for the Finternet into reality? In this section we outline a promising vehicle
to take us there: a token-based financial system, supported by unified ledgers. We first describe the
concept, its economic and financial rationale and basic technological architecture. Following this high-
level overview of the concept, we lay out the nuts and bolts of how the architecture of the Finternet could
look in practice. Finally, we discuss the regulatory, legal and governance questions that authorities will
need to address for unified ledgers, and the Finternet more broadly, to function effectively in a real-world
setting.
3.1 Unified ledgers as a vehicle for an improved financial system
Unified ledgers provide a “common venue” (ie a shared programmable platform) where digital forms of
money and other financial assets co-exist. They aim to provide a quantum leap over existing financial
infrastructure by seamlessly integrating transactions and opening the door to entirely new types of
economic arrangements.
The concept of unified ledgers does not mean “one ledger to rule them all” – a single ledger that
encompasses all financial assets and transactions in an economy. Depending on the needs of each
jurisdiction, multiple ledgers could coexist. Application programming interfaces (APIs) could connect these
ledgers to each other and other parts of the financial system that exist outside the Finternet. The functions
of individual ledgers could evolve over time, and ledgers might even merge as overlaps in scope expanded.
The role of unified ledgers could also vary by jurisdiction. In economies where individuals already have
access to a broad range of reasonably efficient and competitive retail financial services, the main role of
unified ledgers might initially be to enhance the efficiency of wholesale financial services.8 In jurisdictions
with lower levels of financial inclusion, in particular in many EMDEs, unified ledgers might have a stronger
retail focus.
Unified ledgers have two defining characteristics. The first is that they combine all the
components needed to complete financial transactions – financial assets, ownership records, rules
governing their use and other relevant information – in a single venue. The second is that money and
other financial assets exist on the ledgers as executable objects. This means that they can be transferred
electronically using pre-programmed “smart contracts”. Together, these design features allow individuals
and businesses to move money and other assets safely and securely, with less need for external
authentication and verification processes or reliance on external clearing, messaging or settlement
systems.
The structure of the Finternet can be described in terms of a series of building blocks (Graph 4).
The unified ledgers themselves would contain digital representations of central and commercial bank
money and other tokenised financial assets. Within a given ledger, different types of assets would reside
in separate partitions that would be owned and operated by their respective operating entities, which we
refer to as token managers. The ledgers would also include the information necessary for their operation,
such as the data required to ensure the secure and legal transfer of money and assets (eg digital identity
and laws, regulations and rules governing transactions) as well as real-world information sourced from
outside the ledger. Meanwhile, a diverse ecosystem of trust and value service providers would help verify
the identity and preserve the security of users of the system and their financial assets.
Individuals and businesses would interact with the ledgers through applications. These could exist
in multiple forms and allow users to conduct transactions within individual ledgers, between ledgers or in
exchange for assets that exist outside the Finternet. For example, an individual’s e-banking app might
8
A wholesale-focused unified ledger could still deliver significant benefits to end users through lower costs, greater reliability
and faster transaction settlement.

record their tokenised deposits that reside on a unified ledger alongside their non-tokenised deposits that
exist in a traditional database. The apps would allow users to execute transactions directly, or through
smart contracts, enabling a far greater degree of flexibility and customisability than is available in today’s
financial system.
The high-level architecture of the Finternet Graph 4
Source: Authors’ elaboration.
While unified ledgers could in principle contain any financial asset, tokenised money is a core
requirement. Money provides the basic unit of account to denominate transactions. And, as the means of
payment, it represents one side of almost all financial transactions.
As in today’s financial system, the monetary system in the unified ledger system would have two
tiers. Central bank money would represent the first tier and commercial bank money the second.
Settlement of commercial banks’ accounts on the central bank’s balance sheet is the ultimate
guarantee of finality of any financial transaction. As such, wholesale central bank money is a necessary
foundation for any unified ledger. Tokenised wholesale central bank money would play a similar role to
reserves in today's financial system, but offer the enhanced functionalities afforded by tokenisation. Some
central banks might also choose to issue tokenised central bank money in retail form – a digital equivalent
of today’s banknotes – to provide additional choice for users.
Commercial bank money would exist on unified ledgers in the form of tokenised deposits.9 These
assets would provide the natural retail complement to wholesale tokenised central bank money. As in
9
Unlike so-called stablecoins, tokenised deposits would not be bearer instruments. Instead, they would trade using a “burn-
issue” model (Garratt and Shin (2023)). Asset transfers are accomplished by deleting (“burning”) tokenised deposits at the
payer’s bank and assigning (“issuing”) new tokens at the payee’s bank. The deletion and creation of private money tokens has
an associated movement of tokenised wholesale central bank money.

today’s financial system, commercial bank money would serve as the primary means of payment for most
individuals and businesses. And it would be supported with the same institutional arrangements, including
regulation, supervision, deposit insurance and settlement on the central bank balance sheet that exists
today, thereby ensuring the singleness of money.10
Besides central and commercial bank money, unified ledgers could in principle contain an almost
infinite variety of other financial and non-financial assets. All that is required is that the assets exist in
tokenised form. Tokenising assets involves costs as well as benefits. One can view candidates for
tokenisation as lying on a continuum (Graph 5; Aldasoro et al (2023)). At one end are assets in systems
that require frequent manual workflow procedures and have complex legal and regulatory frameworks.
Residential real estate could be one example. Tokenising these assets would involve multiple challenges,
although the potential gains from doing so successfully would be significant. At the other end are financial
assets in digital, mostly automated systems with streamlined processes and clear legal and regulatory
frameworks. Government bonds, at least in AEs, are an example of this type of asset. While these assets
would be the least costly to tokenise, they might deliver smaller benefits than some others as their
transactions are already relatively fast, cheap and convenient.11 The mix of assets that exist on unified
ledgers is likely to evolve over time. It could also vary across jurisdictions, depending on their specific
needs as well as their institutional and legal arrangements.
The tokenisation continuum Graph 5
Source: Aldasoro et al (2023).
To understand the transformational possibilities of unified ledgers, consider a simple financial

transaction: Maria’s decision to purchase a security (eg a share in a company). In today’s financial system,
this seemingly basic transaction would require a complex series of messages between multiple parties
(Graph 6). Maria would start the process by contacting her broker. The broker, in turn, would buy the
shares or direct the trade through a market maker. At this point, several other parties may be involved to
execute and settle the transaction. For example, a central securities depository will be responsible for
electronically managing the securities. They, in turn, must verify the identity of the participants in the
transaction and ensure reconciliation and confirmation of what is being settled with the relevant third
parties (eg clearing agents). An equivalent process will also occur for the seller of the securities on the
other side of the transaction. This “settlement cycle” could take several days, with the lengthy messaging
chains creating multiple points of failure.
10
The singleness of money refers to the fact that deposits held at different commercial banks and central bank money all trade
at par, that is, one dollar (or franc, peso or rupee) deposited at one bank is worth one dollar deposited in another bank. See
Carstens (2023) for a deeper discussion of this issue.
11
That said, the tokenisation of government bonds could facilitate greater access to these financial assets by retail investors.

Securities settlement in today’s financial system Graph 6
Source: BIS (2023).
Moreover, the transfer of the security is only one part of the transaction. The other part would
involve the banking system (Graph 7). As part of the share transaction, Maria would send a payment
request to her bank, referred to here as Bank A (step 1). The bank would respond by debiting Maria’s
account by the transfer amount together with any fees (step 2) and sending a payment order to the
settlement system (step 3). The settlement system debits Bank A’s settlement account and credits the
account of Maria’s broker, Bank B (step 4). It then sends an advice of credit with a reference number to
Bank B (step 5). This follows an acknowledgement with a reference number to Bank A (step 6). Bank B must
ensure that Maria’s broker has an account and perform any KYC or AML/CFT checks (step 7). If any of these
checks fail, then Bank B will need to send a reversal request to the settlement institution (step 8a).
Otherwise, Bank B credits Maria’s broker's account (step 8b) and sends a message confirming the account
adjustment (step 9). In some systems, additional approvals and confirmation messages are necessary
(steps 9 and 10). If Maria and her broker had been residents of different countries, multiple correspondent
banks would have been involved. Each message would take time, creating a lag between the execution of
the transaction and its settlement. A single failure at any point on the chain would be enough to stop the
transaction from completing. In fact, any actions already taken would have to be undone, a costly process
that involves manual actions.
Bank settlement in today’s financial system Graph 7
Source: BIS (2023).

Now consider instead how the transaction could work on a unified ledger. All of the assets
involved in the transaction – the securities being traded, Maria and her broker’s bank accounts and the
banks’ reserves held at the central bank – could in principle exist on the same ledger. Moreover, the assets
would be tokenised and hence be programmable. All information that would ordinarily be stored in
financial institutions’ databases is contained within the tokens and may be modified through smart
contracts. The execution of the transaction would prompt a synchronous movement of the share tokens
into Maria’s digital wallet, a change in the amount of tokenised deposits in Maria’s accounts and a transfer
of wholesale central bank money from Maria’s bank to those of the individual who sold her the securities
(Graph 8). If all of the assets exist on the same ledger and are governed by a common set of governance
arrangements and security protocols, the need for messaging flows would be vastly reduced and the
execution, clearing and settlement of the transaction would take place synchronously.
Asset transfers on a unified ledger Graph 8
Source: BIS (2023).
Essentially, unified ledgers have the potential to resolve many of the pain points in the current
financial system.
Financial services would be faster, more secure and more transparent. With less reliance on
external verification and messaging, delays between the execution of a transaction (when a user agrees to
buy or sell a financial asset or enter into a financial contract) and its settlement (when the asset transfer
actually takes place) could shrink dramatically. Eliminating lengthy messaging chains would also reduce
the scope for errors in financial transactions. These could in many cases now be recorded, tracked and
transferred on a single platform. And, if errors do occur, they would be easier to identify and correct
because unified ledgers would create a single, permanent, tamper-proof historical record of transactions
that enhances trust and transparency. Moreover, it would be possible to complete all legs of a financial
transaction simultaneously and with conditionality, ie the transaction will only take place if certain
conditions have been met.
Regulatory compliance would be simpler. Asset programmability would make it possible to
embed adherence to relevant rules and regulations within the tokens and transaction instructions in the

system.12 In other words, policy would exist as code. Meanwhile, verifiable digital identification and
seamless data transfers across a ledger would greatly ease financial institutions’ compliance with KYC rules.
At the same time, unified ledgers could also enhance user privacy and user control over data.
Crucially, information about users and their transactions could be digitally protected. Subject to user
consent, it could shared with other users or financial service providers only on a strictly “need to know”
basis.
As well as improving existing processes, unified ledgers would enable entirely new financial
products. Increased efficiency and enhanced verifiability would make viable financial services that today’s
financial system cannot provide, either because they are too costly or because the information required
to provide them is too dispersed. Bringing multiple assets onto shared ledgers would allow them to be
combined in novel ways, giving users access to financial services better tailored to their wants and needs.
Services would also be more flexible, with the composability of asset tokens making it easier for financial
institutions to offer low-value services.
Box D
Use cases of unified ledgers and tokenisation
Many interesting real-world applications involve the tokenisation of assets. These range from financial securities to
real assets, such as commodities or real estate (BIS (2023)). This box serves to spark the imagination on how unified
ledgers could be used in the real world:
Investment and government bonds: Picture Aarav, an individual in India, who discovers that investments, including
government bonds, are revolutionised through unified ledgers. This system democratises access to financial assets,
allowing Aarav and his family to own fractions of bonds, making it possible to build wealth with limited savings. This
significantly broadens the investor base and enhances market liquidity. Project Genesis of the BIS Innovation Hub
explores this potential in the context of green bonds.
Access to credit: Now consider Lee Min-su’s small bakery, a cherished local business in Seoul. Tokenised lending
applications could dismantle the financial barriers that have long stood in its way, reducing the costs of loan
origination. Loans for her are managed automatically, from payment to collateral management, with alternative data
providing better insights into credit risk. This is not a distant dream, but a direction in which Project Dynamo of the
BIS Innovation Hub is already headed.
Insurance: Imagine the impact on Carlos, a coffee farmer in Brazil, who benefits from transformed insurance through
unified ledgers offering parametric microinsurance policies. These policies provide customised protection plans to
Carlos and his community, allowing them to cope better with the uncertainties of farming. Dynamic insurance policies
use real-time weather data and adapt to changing risk profiles, bringing hope and security.
Cross-border payments: Finally, imagine Sofia, a nurse from the Philippines working in the United States. With the
advent of tokenised money, Sofia finds peace of mind knowing that her hard-earned money can be sent back home
more efficiently, securely and affordably than ever before. The process is seamless, ensuring that her family receives
the support they need promptly. Project Agorá of the BIS Innovation Hub is exploring how tokenised commercial bank
deposits can enhance the speed, cost and reliability of cross-border money transfers.
The stories of Aarav, Lee Min-su, Carlos and Sofia could be merely the beginning of an era brought forth by unified
ledgers and tokenisation. This burgeoning technological landscape promises to herald a future ripe for entrepreneurial
innovation. The potential applications are boundless.
12
See Project Mandala from the BIS Innovation Hub.

Unified ledgers could also bolster financial inclusion, particularly in EMDEs. By lowering costs,
they would reduce an important barrier that currently locks many people out of the financial system.13 By
bringing together multiple assets in one digital location, they would enable individuals and businesses to
make use of a broader array of financial services. Financial services would be more accessible – individuals
who hold tokenised bank deposits on a unified ledger would find it easier to access alternative savings
vehicles. The existence of physical infrastructure, like bank branches, would cease to be such a constraint
on access to financial services, because the unified ledger would exist digitally and be accessible in various
ways through a range of devices. And because individuals would be better able to control and share their
data, the lack of verifiable identity documents or credit history would cease to be such a large constraint
on financial access. Box D discusses potential use cases of unified ledgers and highlights ongoing work to
making these use cases a reality.
3.2 The nuts and bolts of the Finternet
We now delve into some of the specific design and technological aspects of the Finternet. We first provide
an in-depth description of unified ledgers, which would serve as the core of the system. We then discuss
the necessary steps to safeguard the security of the system.
User-centric Finternet
Delivering universal access to high-quality financial services is central to our vision. Such access is only
possible when we place users – be they individuals or businesses – at the core of financial interactions. The
key attributes of such a user-centric system, summarised in Table 1, provide a blueprint for a digital
economy that is truly by and for the user.
The Finternet represents all the key components and foundational technologies that collectively
constitute the solution of unified ledgers and are brought together in a unified manner for the user. It
builds upon existing legal frameworks within countries and internationally, serving as a digital extension
of traditional legal frameworks. By aligning with laws and regulations, the Finternet adapts to established
principles of permissible actions and consequences of non-compliance, ensuring operations remain
compliant with both national and international standards. It leverages existing infrastructure, including
identity systems, digital signature certificate systems, connectivity, registrars and registries, and digital
public infrastructure, along with any other reusable services available within a jurisdiction.
Given these strong foundations, let us walk through the end-to-end flow of a user navigating this
system.
Initiating the journey with user onboarding. Our journey starts with users, both individuals
and businesses, who aim to manage their assets with ease and security. Upon entering the Finternet, users
can create an account with any unified ledger of their choice. They may also create multiple accounts
across multiple unified ledgers. Every account is linked to a globally resolvable virtual address, and these
addresses are human-readable. A user may set up multiple such addresses (transient or permanent)
depending on their use cases, and if desired on multiple ledgers. Users provide their virtual addresses to
others for tokens to be issued into or requested from their accounts. In this ecosystem, users are endowed
with unparalleled control over their assets. They have the flexibility to create and manage multiple
accounts and sub-accounts, tailor their authentication and authorisation protocols for each account and
engage in a wide range of transactions across the Finternet. This level of control and flexibility underscores
the user-centric ethos of the Finternet. This ensures that users are not just participants but active architects
of their financial journey.
13
Some forms of tokenised central bank money are being designed in ways meant to address barriers to financial inclusion in
payments (Boakye-Adjei et al (2024)). Importantly, unified ledgers could support inclusion beyond payments – in other areas
of financial services such as credit, insurance and savings.

Key characteristics of a user-centric Finternet Table 1
# As a user I … Examples
1 Could be any natural person Individuals and legal persons (eg corporations, governments, non-profits, trusts,
or legal person partnerships)
2 Could use my electronically Identities: Passport, national (digital) ID card, driver’s licence, birth certificate, social
verifiable identities and security number/card, bank cards, etc
verifiable attestations to
participate in the ecosystem Attestations: Investor accreditation, educational degrees, employment history,
professional licences/certifications, health/financial records, criminal background
checks, social media, etc
3 Could authenticate myself PIN, biometric verification, hardware token, SMS/email-based, authorisation chains,
and authorise transactions etc
on any ledger of my choice
4 Could create personalised Rule-based transactions (eg predefined limits/caps on the amount/volume),
integrated financial transaction interlinking, delegation, etc
workflows
5 Could choose what data to Virtual addresses, aliases based on time/payee/amount, zero knowledge proofs of
reveal, how and to whom personal data, etc
6 Could use any device for Mobile phone, laptop, desktop, mixed reality headset, internet-of-things device,
authorising transactions NFC tag and other form factors
7 Could send and receive Any asset (registered/unregistered, regulated/unregulated, attested/unattested),
anything of value in any any amount, anyone (any natural or legal person), anywhere
unit, any amount, to
anyone, anywhere
8 Could manage my assets Banks, brokers, asset management companies, depositories, etc
with any asset manager of
my choice
9 Should be protected from Know-your-customer and anti-money laundering, fraud monitoring/alerts,
fraud, abuse and bad actors encryption and other secure cryptographic mechanisms, two-factor authentication,
regulatory compliance checks, sanctions checks
10 Should be able to adhere to Banking law, securities law, taxation law, dispute resolution mechanisms, etc
established legal norms
Sources: Authors’ elaboration.
The unified interledger protocol – a mechanism that ensures seamless interoperability across
ledgers – is a cornerstone of the system. It allows users to open their account in any ledger and facilitate
transactions between any ledger. The protocol ensures the integrity and consistency of transactions across
different ledgers, providing finality through strong technical guarantees that once a transaction, such as
an asset transfer, is completed, it is secure and irreversible.
For financial transactions, establishing trusted user identity is important. Trusted identity, crucial
for both natural and legal persons, is anchored in verifiability, using digital signatures to accurately
authenticate participants’ identities. Features such as portability and permanence make these identities
functional across various platforms. This ensures consistency while being adaptable for updates over time.
Self-describing identities streamline access, eliminating external verification needs and making the system
inclusive, bridging divides across technical capabilities and geographic locations. Moreover, identity is
central to the enforcement of rules and policies within the system, necessitating features like traceability,
accountability and observability directly tied to identity management. The “only submit it once” approach
should be adopted as it specifically addresses the redundancy in submitting KYC and other identity
documents, and these identity credentials can be attached to the user’s profile for reuse.

Users can have their assets tokenised by token managers. Tokens within the Finternet are
digital representations of assets that facilitate the ownership, transfer and management of value in a digital
format. These versatile tokens can represent a diverse array of assets, ranging from traditional, tangible
assets like real estate and artwork to intangible assets such as intellectual property and company shares,
as well as inherently digital assets like digital currencies or virtual goods which exist on the unified ledger.
Managed on the unified ledger and settled atomically, these tokens ensure that transactions are executed
completely, reducing the risk of partial transaction failures and reinforcing the system’s security and
trustworthiness.
Each token on the Finternet is not only a digital representation of an asset but also carries core
data and metadata that detail its characteristics and function, and the rules governing its use. The core
data encapsulates essential information about the token, such as its type (eg whether it is a utility, security
or currency token), ownership details and transaction history. Meanwhile, the metadata provide additional
context and specifications about the token’s functionality, including verifiable credentials, attestations and
any specific rules or regulations it must adhere to. This metadata can outline restrictions on transferability,
eligibility criteria for holders or compliance requirements based on jurisdictional laws or sector-specific
regulations. By embedding both core data and detailed metadata, tokens within the Finternet offer a rich,
multi-dimensional digital asset that can interact seamlessly within the digital ecosystem. This structure
ensures that each token not only represents a piece of value but is also accompanied by a comprehensive
set of information that enables secure, transparent and regulated interactions, enhancing the utility and
governance of digital assets within the unified ledger ecosystem.
The process of tokenisation sits at the core of the Finternet. This is where assets are converted
into digital tokens by token managers – entities that could range from central banks and commercial banks
to asset management companies and private corporations. These digital tokens represent a direct link to
the user’s assets, encapsulating the principles of ownership, value and trust in a digital form. Each token is
governed by a set of rules and regulations, ensuring that every transaction adheres to the stringent
compliance and security standards set forth by the token managers. For example, tokenised deposits may
follow regulations around KYC, transaction limits and cross-border restrictions, while tokenised shares
could be subject to specific securities laws, detailing permissible buyers and sellers. Conversely,
detokenisation allows users to convert digital tokens back to their original or traditional asset forms or to
other digital formats, thereby unlocking their value for both conventional and digital use. A robust
infrastructure of on-ramps and off-ramps supports the system, ensuring a seamless transition of assets
between the digital and traditional economies. Tailored to accommodate the specific needs of different
asset types, this setup adeptly handles the complexities of regulatory and registration requirements,
effectively merging the traditional economic systems with the digital-first domain.
Token managers play a pivotal role in ensuring regulatory compliance for these tokens. Token
managers might also maintain their own private or shared ledgers outside the Finternet, allowing for
synchronisation between the unified ledger and their proprietary ledgers. This flexibility facilitates easy
adoption, as token managers can issue tokens to users independently of the Finternet’s internal asset
management standards. It also provides mechanisms for the reproduction and recovery of tokens in case
of loss. This comprehensive approach makes the digital economy more accessible, secure and user-
friendly, catering to a broad spectrum of digital and traditional asset transactions. Additionally, users have
the autonomy to manage tokens they create, acting as their own token managers. However, a key
characteristic of the Finternet is that users can only produce tokens for themselves and not for others. This
ensures that a user cannot produce unauthorised tokens on behalf of other token managers.
Enhancing transactions with trust and value-added services. As users transact within the
Finternet, a suite of trust and value-added services augment their journey. These services, provided by
entities such as attestors, verifiers, lockers and guarantors, infuse additional layers of security and
credibility into the tokens. They play a crucial role in building a foundation of trust within the ecosystem,
making transactions safer and more reliable. Trusted data takes a central role in transitioning to a digital-
first financial landscape, where transactional information becomes transparent, immutable and directly

verifiable. This evolution marks a significant departure from traditional methods, establishing a framework
where data integrity is paramount. Trusted data encompass a wide array of financial interactions, from
transaction histories to asset ownership records, ensuring that each piece of data is securely recorded and
resistant to tampering. This level of data reliability and security is instrumental in detecting and preventing
financial crimes, enhancing the effectiveness of regulatory compliance and fostering trust among
participants. It supports the development of predictive analytics and risk management tools, enabling
proactive measures against fraud and other financial irregularities.
Trusted identity and data serve as cornerstones to facilitate dynamic contracting, substantially
enhancing the network effects associated with asset tokenisation. Smart contracts automate the execution
of agreements between parties securely and efficiently, streamlining transactions and fostering trust within
the ecosystem.
Users can access a diverse ecosystem of applications to interact with unified ledgers. On
the Finternet, applications will serve as versatile tools for individuals and businesses to manage an
extensive array of financial aspects, encompassing banking, investments, insurance and beyond. Innovative
applications will emerge, enabling the management of diverse asset types, such as real estate, paintings,
digital assets and shares, offering a consolidated view of one’s financial and asset portfolios. Individuals
will benefit from these apps, which facilitate not only traditional financial transactions such as domestic
and cross-border payments but also dealings in unique asset classes, enhancing the fluidity of personal
and investment finance.
Moreover, these applications will enable personalised financial planning, with AI-driven insights
suggesting optimal investment strategies, insurance coverage adjustments and savings plans tailored to
individual goals and risk profiles. Businesses will access a suite of applications designed to streamline
financial operations and enhance decision-making, manage cash flows, access varied financing options
and optimise investment decisions. They will also engage in business-to-business (B2B) transactions,
supply chain finance and real-time invoicing and payment processing. Together, these can foster a more
dynamic economic environment.
A diverse range of developers and entrepreneurs can develop applications on the Finternet, each
focused on solving specific problems for their target customers. By leveraging the underlying trust and
robust infrastructure that the Finternet offers, they can innovate and create tailored solutions that meet
the unique needs of various user segments.
Across these diverse interactions, the applications in the Finternet will not only simplify financial
management but also introduce levels of customisation and efficiency previously unattainable. This will
enable all users to make informed decisions and achieve financial resilience and growth in an
interconnected digital world. That, in turn, will ensure that everyone, from individuals to small and large
businesses and society as a whole, benefit from these advances.
Unified ledgers: a secure, immutable and programmable backbone. Unified ledgers offer the
capacity to manage a wide spectrum of assets, each distinguished by its legal status, market behaviour
and security level. This diversity necessitates a nuanced understanding of asset classifications, ranging
from registered assets, like real estate and vehicles, which benefit from legal protections and enhanced
transactional security, to unregistered assets, such as privately sold artwork, which, despite offering privacy,
may face challenges in ownership verification and liquidity. The distinction between regulated assets, like
publicly traded securities, and unregulated assets, including some digital tokens, highlights the varying
degrees of investor protection and market integrity. Moreover, the differentiation between attested assets,
which provide verified assurances of authenticity, and unattended assets, which lack formal validation,
underscores the importance of establishing clear guidelines to manage the risks of fraud and disputes.
These distinctions are vital for designing regulatory frameworks that leverage the benefits of tokenisation
while mitigating its inherent risks.

Diving deeper into the core characteristics of unified ledgers across different components such
as programmability, smart contracts, tokens and account management, we have outlined an architecture
diagram (Graph 9).
Architecture diagram for unified ledgers Graph 9
At its core, users leverage this system to perform a spectrum of financial activities, from
transactions to asset management, facilitated by an array of user-friendly interfaces and applications. This
system’s hallmark – programmability – enables the customisation and automation of financial operations,
allowing for the creation of bespoke financial products and services that cater to distinct user needs.
A pivotal advance within this system is its foundation of immutability. This characteristic heralds
a departure from traditional ledger technologies fraught with inefficiencies and vulnerabilities, towards a
unified, interoperable network of ledgers resistant to errors, fraud and unauthorised alterations.
Immutability in unified ledgers ensures that once a transaction is recorded, it becomes irreversible,
establishing a permanent, tamper-proof historical record. This shift from traditional databases, which
cannot guarantee immutability across organisations, to technologies that do such as distributed ledgers,
signifies a pivotal advance. The characteristic of immutability within these ledgers underscores the fact
that the entities providing the ledger cannot alter or insert data post-recording. This reliance on
technology over people, processes and legal frameworks to ensure the immutability of records denotes a
critical evolution. Traditional databases lack this cross-organisational immutability, necessitating
dependence on human oversight, procedural checks and legal protections to maintain data integrity.
However, in unified ledgers, immutability is guaranteed by code, employing cryptographic methods that
make altering history computationally infeasible. The linkage of each new record to the previous one
requires exponential resources to change, making any attempt at tampering or historical revision nearly
impossible. In an immutable ledger, mechanisms can be implemented to either block fraudulent
transactions or issue compensatory ones as a form of reversal and rollback in cases of fraud.
The financial industry went through a similar leap in the last few decades with the advent of
atomicity, consistency, isolation and durability (ACID) database technology. Initially, asset managers and
financial institutions were reluctant to move from physical records to digital databases due to concerns

about data integrity, security and transaction reliability. ACID properties addressed these concerns by
ensuring that transactions are processed reliably and securely: atomicity guaranteed that transactions are
all-or-nothing; consistency ensured database rules are never breached; isolation maintained transaction
independence; and durability assured that once a transaction is committed, it is permanent, even in case
of a failure. This significant development made digital databases a trustworthy alternative to physical
records, enabling efficient, scalable and accurate financial operations. This fundamentally transformed the
banking and financial sectors. Unified ledgers with guaranteed immutability are now the next logical leap
for record-keeping in financial services, and will shape the future.
Leveraging immutability, guaranteeing finality is a core characteristic of a unified ledger. Finality
is crucial across legal, financial and technological domains as it provides certainty and stability, enabling
parties to proceed with confidence knowing that actions or decisions are definitive and unalterable. It
builds certainty for all. In unified ledgers, finality ensures transactions are irreversible once executed,
cementing a trustworthy foundation for legal and economic activities. Rigorous pre-verification and fraud
checks during transactions minimise the need for reversals, which, if necessary, are executed as
compensatory actions by authorised entities. This process maintains the systemic integrity and
dependability of a unified ledger environment, bolstering stakeholder confidence by ensuring transactions
are conclusively recorded and enforceable.
Tokens within this ecosystem can represent a wide range of assets, from registered to
unregistered, regulated to unregulated, and attested to unattested. Each category caters to different types
of assets and legal frameworks.
For instance:
 Registered tokens represent claims of legally registered assets, such as real estate or vehicles,
facilitating transactions that are compliant with specific registration standards.
 Unregistered tokens could be used for assets that do not require formal registration, like certain
types of digital art or collectibles, offering a more flexible approach to ownership and exchange.
 Regulated tokens represent assets such as money or publicly listed shares and bonds that are
governed by particular financial sector regulations.
 Unregulated tokens encompass tokens that operate outside the purview of traditional financial
regulators, providing users with new forms of value exchange such as virtual assets in a game.
 Attested tokens contain verified proof of an asset’s authenticity, such as product certifications,
ensuring trust and credibility in digital interactions.
 Unattested tokens, on the other hand, represent assets or claims that do not have verified
backing but still hold value within certain communities.
Moreover, the system’s flexibility extends to the nature of the tokens themselves, which can be:
 Fungible, meaning they are divisible and interchangeable, like money, where each unit is identical
to and interchangeable with another unit of the same type.
 Non-fungible tokens (NFTs), which are unique and cannot be divided or interchanged,
representing ownership of specific items such as digital art, unique digital goods or real-world
assets with a digital certificate of ownership.
 Bearer tokens allow possession to equate to ownership, facilitating anonymous transactions and
ownership transfers.
 Non-bearer tokens require identification of the owner for transactions, enhancing security and
regulatory compliance for assets such as registered securities.

 Tokens enabling blocking mechanisms can be temporarily locked or restricted for transactions,
akin to a cheque being put on hold, ensuring financial compliance or adherence to contractual
conditions.
 Non-blocking tokens offer uninterrupted liquidity and transaction capability, akin to cash or e-
cheques, providing users with continuous access to their assets.
Provisions for asset and token recovery in scenarios of loss are crucial, underscoring the
importance of registered and regulated assets in providing comprehensive protections for asset owners.
Programmability through smart contracts. The essence of programmability within the
Finternet is encapsulated in its sophisticated implementation of smart contracts. These contracts are
essentially executable code that automate the execution of contractual agreements, thereby eliminating
the need for intermediaries and significantly reducing the potential for disputes. Smart contracts on the
Finternet can operate with remarkable flexibility, being deployable both remotely and directly on the
ledger, which enables a wide array of transactional and contractual operations to be conducted with
efficiency and precision. This capability is critical in ensuring that financial agreements are executed exactly
as intended by the contracting parties, without the delays or errors that can occur in manual processes.
The Finternet’s smart contracts can govern a multitude of financial interactions, from simple transfers of
value to intricate, conditional financial instruments and services. This level of automation and precision
dramatically enhances the speed, efficiency and security of transactions within the ledger system.
Further augmenting the power of smart contracts is the Finternet's comprehensive support
infrastructure, which includes a rich ecosystem of contract templates, policy frameworks and applets. This
infrastructure provides developers and financial engineers with a robust toolbox for creating and
deploying customised smart contracts tailored to specific transactional or operational needs. Smart
contract templates offer a starting point for contract development, encapsulating common contractual
arrangements and best practices. Policy frameworks ensure that contracts comply with relevant
regulations and standards, embedding compliance directly into the transactional fabric of the ledger.
Applets extend the functionality of smart contracts, enabling them to interact with external data sources,
trigger events based on real-world occurrences or integrate with other digital services and platforms.
This innovative approach to digital contract execution not only underscores the Finternet’s
commitment to flexibility and reusability but also highlights its potential to revolutionise how contracts
are created, executed and enforced in the digital age. By leveraging the programmability and automation
capabilities of smart contracts, the Finternet offers a platform that can adapt to the evolving needs of the
digital economy, ensuring that transactions are conducted with unparalleled efficiency, reliability and
compliance.
A unified ledger meticulously records a broad spectrum of data. This centres primarily on
transactions, ownership and tokens, while also extending its capabilities to encompass various additional
elements. Here is an expanded overview of what a unified ledger typically records:
1. Transactions: Fundamental to its operation, the unified ledger documents transactions, detailing
the transfer of tokens from one party to another. These transactions include critical information
such as the sender’s and receiver’s identifiers, the transferred amount, the transactions timestamp
and a unique transaction identifier.
2. Ownership: The ledger accurately tracks the ownership of digital assets. This ensures that every
transfer and change in ownership is indelibly recorded, thereby providing a transparent and
secure history of asset movements.
3. Tokens: The ledger includes comprehensive records of tokens, which are digital representations
of assets or rights within the system. These records cover a wide range of token types, from those
representing physical assets to digital rights and currencies, detailing their issuance, transfer and
rules of engagement.

4. Smart contracts: Unified ledgers often support the deployment and operation of smart contracts,
which are self-executing contracts with the terms of the agreement directly written into code.
The ledger captures the deployment, operational rules and all interactions or transactions
initiated by these contracts.
5. State changes: This involves recording updates to the condition or status of digital assets or
accounts on the ledger, including alterations in smart contract variables or updates in digital
wallets’ balances.
6. Verifiable credentials: Capable of storing digital claims about an entity verified by a trusted issuer,
the unified ledger uses these for applications such as identity verification, ensuring data integrity
and privacy.
7. Cryptographic hashes and immutability-related data: the ledger employs cryptographic hashes
as unique identifiers for data blocks, securing the unalterable linkage between them. Additionally,
it records data underscoring its immutable nature, including cryptographic proofs and
validations. This combined approach ensures the ledger’s history remains intact, unchangeable
and tamper-proof (see Box E).
Tracking fraud
In the complex landscape of financial fraud, practices like impersonation, circumvention and compromise
highlight the multifaceted challenges faced by individuals and institutions alike (FinCen (2024)).
Impersonation frauds exploit personal identities. Circumvention tactics bypass established standards and
protocols. Compromises breach the security of accounts and systems. These categories encompass a
broad range of fraudulent activities, from altering records and identity theft to cyber incidents and the
abuse of insider access, each exploiting vulnerabilities for illicit gain. Against this backdrop, the Finternet
stands as a formidable defence, offering advanced mechanisms to counteract these challenges.
Fraud at entry: preventing unauthorised access

 Identifiability and verifiability: The unified ledger enhances the ability to identify users and –
where needed – to trace suspicious transactions and activities, making it significantly harder for
impersonators to gain unauthorised access. By embedding advanced identity verification
mechanisms that leverage biometric data, real-time authentication and digital signatures, the
system ensures that only legitimate users can enter, and protects users from identity theft.
 Embedding of regulatory rules into code: Automating compliance through smart contracts
prevents circumvention of entry controls. Regulatory requirements, such as KYC and AML/CFT
standards, are programmed into the system, ensuring that all users meet strict criteria before
being granted access.
Fraud once within the system: safeguarding against internal threats

 Observability and auditability: Once users are within the system, automated monitoring and real-
time alerts for unusual activities help to detect internal fraud. The system’s observability ensures
that any attempt to manipulate transactions or records is immediately flagged, while auditability
allows for detailed examination of actions when needed, enhancing accountability.
 Immutability and verifiability: The immutable nature of records within the unified ledger prevents
alterations, ensuring that once a transaction is recorded, it cannot be changed or deleted. This
verifiability deters insider fraud and abuse, as any fraudulent attempt to alter records will be easily
detected and irrefutably traced back to the perpetrator.

Box E
Advances in cryptographic and ledger technologies
The financial sector has extensively leveraged cryptographic technologies, particularly encryption, to safeguard
sensitive data, secure online transactions and ensure the confidentiality and integrity of financial communications.
Encryption protocols like SSL/TLS are used to protect data transmitted over the internet, preventing unauthorised
access and data breaches. The Advanced Encryption Standard (AES) secures data at rest, ensuring that stored financial
information remains confidential and tamper-proof. Public Key Infrastructure (PKI) has played a pivotal role, serving
as the backbone for both encryption/security and the integrity of digital records. PKI utilises a two-key asymmetric
system, where a public key is used for encryption and a private key for decryption. This framework secures sensitive
data in transit and also underpins the authenticity and integrity of digital records through digital signatures.
Digital signatures, enabled by PKI, inherently facilitate non-tamperability in digital transactions and records.
By providing a secure means to verify the identity of transaction participants, they ensure that any data or records
involved remain unaltered after signing. This verification process is key to maintaining data integrity, as any tampering
with the content would invalidate the digital signature. Consequently, this mechanism not only protects against
unauthorised modifications but also establishes non-repudiation, making it impossible for the signatory to deny their
action or the authenticity of the signed document, thereby reinforcing trust and security in digital interactions.
Leveraging digital signatures, verifiable credentials and attestations, as standardised by the World Wide
Web Consortium (W3C), bolsters the non-tamperability and verifiability of digital transactions. These credentials, which
include examples like digital passports, educational degrees and professional certifications, are signed by trusted
issuers and can be verified easily across platforms. Verifiable attestations, such as employment history confirmations
or credit score validations, support these credentials by providing trusted evidence of the claims made. This system
ensures secure, reliable identity verification and data integrity, streamlining the verification process, reducing fraud
risks and enhancing efficiency in digital ecosystems.
Recent advances in identity data-sharing, such as Self-Sovereign Identity (SSI), empowers individuals to
control their personal identity data, enabling them to share it securely and as needed. Beyond identity data,
technologies like zero-knowledge proofs (ZK proofs) and multi-party computation (MPC) could also help to safeguard
privacy and confidentiality in data-sharing. ZK proofs allow one party to prove to another that a statement is true
without revealing any information beyond the validity of the statement itself. MPC enables multiple parties to jointly
compute a function over their inputs while keeping those inputs private, enhancing the security and confidentiality of
data-sharing.
Going beyond data-sharing, we can incorporate concepts such as tokens, programmability, composability
and, in some cases, immutability into the regulated financial system, drawing from technological developments with
hashing, merkle trees, smart contracts and various distributed ledger technologies (such as Hyperledger, Ethereum,
etc).
In sum, these developments represent a transformative shift in the way trust is established, enabling massive
network effects and unlocking new interactions across various sectors, thus redefining the dynamics of digital and
economic exchanges. This is an indicative list, and we are at the threshold of many more advances. As technologies
continue to evolve, it is critical not to get locked into specific solutions and instead design for evolvability, ensuring
adaptability to future changes and innovations. Moreover, we must look to leverage the best technological advances
while keeping in mind consumer protection, balancing innovation with the safeguarding of users’ rights and interests.
Addressing social engineering attacks

 Educational programmes and behavioural analytics: While technological safeguards are vital,
educating users on the risk of social engineering attacks is equally important. Behavioural
analytics can be employed to detect patterns indicative of social engineering, such as unusual
transaction requests or atypical access patterns, triggering additional verification steps.
 Multi-factor authentication and dynamic permissions: Implementing multi-factor authentication
and dynamic permission settings for transactions can mitigate the risk posed by social
engineering. By requiring additional authentication for sensitive actions and adapting

permissions based on risk assessment, the system can prevent unauthorised transactions even if
a user is manipulated.
As outlined above, the Finternet represents a significant advance over traditional record-keeping
methods, which were susceptible to fraudulent alterations of individuals’ property records and other forms
of financial deceit. The Finternet’s approach to combating fraud – through advanced technological
safeguards, regulatory compliance embedded into code, and a strong focus on user education against
social engineering attacks – offers a comprehensive solution to the pervasive challenges of impersonation,
circumvention and compromise. This secures the financial ecosystem against both external and internal
threats.
Multi-layered approach to governance Graph 10
The Finternet is designed to be an inclusive and open ecosystem that caters to a wide spectrum
of participants, including individuals and businesses. This inclusiveness ensures that the benefits of digital
financial transactions and asset management are accessible to all, fostering economic participation and
innovation across various sectors. For users, the system being open to all underpins a foundational
principle of equitable access, democratising financial services and ensuring that individuals and businesses,
regardless of size or sector, can leverage the Finternet for their transactions and asset management. This
approach, however, does not compromise the importance of adhering to established norms; all
participants are subject to regulatory, legal and institutional frameworks that ensure the system’s integrity
and security.
On the technological front, making the infrastructure open to all encourages a culture of
innovation and collaboration. By allowing a wide range of developers and entrepreneurs to engage with
and build upon the Finternet’s protocols, platforms and products, the system fosters a rich ecosystem of
financial and non-financial applications. This openness not only accelerates technological advances within
the Finternet but also ensures that the system can adapt to evolving user needs and global technological
trends, maintaining its relevance and utility.
Governance within the Finternet is intricately crafted, automating regulatory compliance and
enforcement at the token level through the pivotal role of token managers. These managers are the
custodians of compliance, intricately weaving legal and regulatory mandates directly into the architecture
of each token. This token-centric governance approach not only makes the system’s oversight more
effective and streamlined but also ensures that governance is dynamically responsive to the evolving
landscape of digital assets and transactions. Each token, regardless of its nature or origin, is held to the

highest standards of security, legality and transparency, underpinned by a governance model that skilfully
balances the principles of openness and stringent regulation.
Sophisticated technological solutions enhance the governance model. Non-repudiability ensures
unequivocal accountability for all actions within the ecosystem, reinforcing the integrity of transactions.
Auditability enables rigorous verification of compliance and integrity across the board, assuring adherence
to legal and regulatory frameworks. Observability provides stakeholders with real-time insights, facilitating
swift and efficient dispute resolution and proactive issue management. Moreover, the innovative “policy
as code” concept transforms complex legal and regulatory directives into executable code embedded
within tokens, automating compliance in an unprecedented manner. This advanced governance toolkit
ensures the Finternet not only meets but exceeds the requirements for a secure, transparent and compliant
digital financial environment, fostering an ecosystem where innovation and growth are nurtured within a
framework of trust and accountability.
Effective implementation of the technology will be driven by use cases that benefit society
Embarking on the journey towards unified ledgers requires a strategic approach that acknowledges and
addresses the concerns of all stakeholders involved. The key to successful implementation lies in selecting
starter use cases. These should leverage what exists within a society, seamlessly integrate with current
habits and incentives to minimise resistance (prioritising low-friction, high-impact initiatives) and cater to
the needs and expectations of a broad range of stakeholders. It is crucial to identify and focus on areas
where shared goals among individuals, regulators and market players exist, facilitating a smoother
transition towards widespread acceptance and adoption. By embracing a proactive stance that ranges
from harnessing enthusiasm to mitigating scepticism, the aim should be to showcase concrete benefits
that resonate with the interests and alleviate the primary concerns of all parties.
3.3 Regulatory and legal considerations
Real world deployment of the Finternet, including unified ledgers, will require the development of a robust
legal, regulatory and governance framework. Such a framework is essential to protect participants and
preserve the integrity of the financial system. Without these guard rails, the Finternet will fail to earn the
trust of consumers and businesses, and society as a whole will not reap the benefits that new digital
financial technologies can offer. It is incumbent on governments and other public institutions to urgently
address the unresolved regulatory and legal questions. It would be unfortunate if unclear or outdated
legal frameworks unnecessarily delayed the long-overdue advance of the financial system. The work to
address these issues should begin in earnest. And it should proceed at pace.
A basic starting point is that existing laws and regulations should apply to participants and assets
in the Finternet. Unified ledgers and related infrastructure should not provide venues to circumvent laws
or to engage in regulatory arbitrage. An implication of this is that jurisdictions do not need to create an
entirely new bespoke legal framework to deploy unified ledgers. Indeed, the principle of technological
neutrality suggests the authorities should seek to align the legal treatment of similar financial assets being
transacted in different venues to the greatest degree possible. This consideration may be particularly
relevant for EMDEs looking to deploy unified ledgers, where the capacity to develop entirely new legal
frameworks may be limited.
Nonetheless, the development of unified ledgers does raise novel legal and regulatory issues.
Among the most fundamental is the question of whether central banks have the authority to issue
tokenised central bank money. As recently as 2020, the legal frameworks of around 80% of central banks
were either unclear on this point or specifically barred central banks from issuing tokenised central bank
money (Bossu et al (2020)). Regardless of whether or not central banks ultimately choose to issue
tokenised central bank money, this uncertainty needs clarification. Without a wholesale tokenised central
bank asset at its core, the future financial system will ultimately rely on legacy architecture to settle financial
transactions. This would undermine many of the gains offered by unified ledgers.

Beyond questions of issuance, the legal status of the tokens that exist on unified ledgers requires
clarification. For example, in some jurisdictions doubt exists about whether tokenised deposits would be
treated as deposits, securities or some other form of financial asset under existing law (Deutsche
Bundesbank (2023)). This, in turn, raises questions about the tax treatment of these assets, as well as
whether they would be covered by deposit insurance if the issuing bank were to fail. More broadly, there
is a need for careful examination of how existing legal requirements apply to assets that exist in a tokenised
environment, taking account of the additional functionalities of tokenised assets. For example, in
Switzerland legislative reform was needed to loosen a requirement for electronic signatures to accompany
asset transfers before it was possible to trade tokenised assets on shared platforms (Garrido (2023)). This
example also illustrates how the move to a tokenised financial system could help to simplify previously
complex regulatory requirements.
Some jurisdictions may use the deployment of new financial infrastructures like unified ledgers
as an opportunity to develop new legal norms. For example, they may wish to introduce measures to
promote greater competition in the finance industry, such as through the promotion of open finance or
mandating interoperability.
Deployment of unified ledgers also poses a range of complex governance questions.
Fundamental issues include the ledgers’ ownership, control of which financial institutions can participate
in the ledger and decision-making regarding the types of assets and tokens that appear on the ledger and
the rules governing their use. As with other financial market infrastructures, a number of alternatives
suggest themselves, ranging from them being fully publicly owned and operated entities to relying entirely
on private sector solutions, with public authorities’ role limited to establishing the overriding legal
framework and enforcing basic investor and consumer protection safeguards. Many intermediate solutions
between these two extremes are also possible. Ultimately, the optimal choice may depend on the specific
design and function of a given ledger, including the range of tokenised assets it includes. Different
jurisdictions could also opt for different approaches in this regard, reflecting the characteristics of their
own economies, financial markets and legal and regulatory structures.
Technological advances can help to strengthen legal and regulatory compliance within unified
ledgers. Because tokens are programmable, it may be possible in some instances to embed compliance
with laws and regulations, including AML and KYC requirements, within the code that governs the tokens
and their transactions. The existence of a non-repudiable and verifiable digital audit trail within a ledger
could also help to ensure accountability and aid investigation and dispute resolution.
But many regulatory and legal considerations are beyond the reach of technological solutions.
This reflects the foundational principle that trust in the financial system does not come from technology
but from the legal and regulatory framework that underpins it.
In many instances, there may be value in international cooperation in designing a legal and
regulatory framework for unified ledgers. Indeed, for ledgers used to facilitate cross-border transactions,
such cooperation at a multilateral level will be essential.14 Although the challenges in developing and
aligning legal and regulatory frameworks on a cross-border basis are higher than those within a single
jurisdiction, they are not insurmountable. Previous initiatives, such as the Continuous Linked Settlement
(CLS) system, show that with sufficient will and flexibility it is possible to establish mutually agreeable
governance arrangements for cross-border financial arrangements. Nonetheless, until such systems are in
place, authorities may face a trade-off between delivering an improved domestic financial system in the
near term and realising the larger gains from more seamless and integrated global financial markets in the
longer term.
14
Without some form of multilateral agreement, interlinking of individual country unified ledgers to enable cross-border
payments would require more than 193 x 193 new bilateral agreements, a near impossible task.

4. Design principles
As the above discussion has highlighted, there is no single path to building a Finternet centred around
tokenised financial architectures and unified ledgers. Policymakers will face many choices, including those
relating to unified ledgers’ scope, technology, access and ownership. Jurisdictions will naturally differ in
their approaches, reflecting their own unique circumstances.
Some characteristics are non-negotiable, however. In what follows we propose eight key design
principles and explain their rationale. We believe that by following these principles, unified ledgers can
achieve a balance between robust governance and operational efficiency, while fostering an environment
ripe for innovation and growth.15
Principle #1: Users at the centre

The key rationale for developing the Finternet is to offer individuals and businesses access to the greatest
possible range of financial services, in the most flexible way and at the lowest possible cost. The best way
to achieve this goal is to prioritise the needs and wants of the system’s users. In most cases, user priorities
should guide technological and regulatory choices, not the other way round.
Principle #2: Interoperability

It is neither feasible nor desirable to build a single unified ledger to encompass all financial assets and
transactions. Accordingly, unified ledgers will need to be interoperable with other parts of the financial
system. Ideally, such interactions will be seamless, enabling functionality across different protocols,
platforms and products. Interoperability will facilitate the creation of a “network of networks” to connect
the diverse array of specialised networks that characterises modern financial systems.16 Such an
interconnected framework significantly enhances the functionality and reach of each participating
network. The emergence of such a complex system requires the development of consistent standards and
protocols to enable interoperability, while preserving the autonomy and integrity of each subsystem. This
strategic, interconnected model aims to foster a financial ecosystem that is both more integrated and
resilient, effectively responding to the sophisticated demands of modern finance.
Principle #3: Evolvability

The technological advances that motivate the development of unified ledgers will eventually be
superseded. Accordingly, the Finternet should be able to evolve to accommodate future technological
advances, while maintaining backward compatibility with existing systems where necessary. Such
evolvability will facilitate continuous improvement and open avenues for innovation, by enabling new
entrants to contribute meaningfully to the ecosystem’s development. Adopting a pragmatic “+1” approach
by leveraging existing systems as a foundation ensures a seamless transition towards more sophisticated
technologies, balancing innovation with practical implementation.
Principle #4: Modularity

This principle highlights the importance of endowing the architecture with the capacity to evolve through
discrete, independently modifiable layers, minimising disruption across the ecosystem. Further, providing
extensive programmability within the infrastructure is essential, enabling users to tailor functionalities to
their unique requirements, fostering a highly personalised and flexible environment.
15
As discussed at greater length in BIS (2023), unified ledgers are a new type of financial market infrastructure. The design
considerations offered here are high-level principles from an architecture point of view and are meant to complement, not
replace, the Principles for Financial Market Infrastructures (PFMI; CPSS-IOSCO (2012)).
16
In modern financial systems, each of these networks is dedicated to distinct domains and equipped with unique technological
infrastructures, governance protocols and user ecosystems.

Principle #5: Scalability
The scope and range of participants on the Finternet is likely to expand over time. Conceivably, this growth
could be non-linear, as the introduction of new users and products enhances the value of the entire
network, encouraging further growth. Accordingly, unified ledgers need to be able to accommodate such
growth without compromising security and functionality.
Principle #6: Division of labour and competition

Public and private sector institutions both have roles to play in developing the Finternet. For the public
sector, a key objective is to provide the “rails”, which could include the core infrastructure, rules and
regulations on which private financial institutions can operate. A key objective will be to promote healthy
competition between private actors through open platforms, and a level playing field can support
innovation and lower costs for end users by reducing rents. In this regard, policymakers should bear in
mind that in today’s system, inefficiencies are often someone’s profit; accordingly, some resistance is to
be expected and will require careful compromises. Creating an innovation-friendly atmosphere that
supports combinatorial innovation allows for the blending of different technologies and methodologies,
paving the way for breakthrough advances.
Principle #7: Inclusiveness and accessibility

Innovators are keen to leverage infrastructure with the ultimate goal of making financial activities
universally accessible, affordable and inclusive, ensuring no one is left behind. In the current financial
services ecosystem, several constraints have emerged, presenting unique challenges yet opening avenues
for innovation and improvement. Notably, the implementation of new technologies and systems has been
met with high costs and operational delays, contributing to a slower pace of adoption across the board.
This situation has inadvertently limited the empowerment of individuals within the financial ecosystem.
The potential for widespread network effects – which could significantly enhance user empowerment and
system efficiency – remains largely untapped. Such challenges underscore the need for a re-imagined
approach that prioritises affordability, flexibility and inclusiveness in digital financial services. The
architecture should aim wherever possible to serve any sector, be accessible on all devices and cater to a
wide range of purposes (from personal finance to institutional operations) while offering a choice of
custodial services. It should support multiple data standards and integrate methods for determining the
quality of assets, and respect existing legal norms.
Principle #8: Security and privacy

Last but certainly not least, the security of the infrastructure is a fundamental design principle. This pertains
to security both vis-à-vis users and of the infrastructure at large. For one, a digital financial infrastructure
should have adequate safeguards for data privacy and commercial secrecy, while ensuring system integrity
by guarding against money laundering, financing of terrorism and fraud. Moreover, strong institutional
and legal safeguards to ensure operational and cyber resilience of the infrastructure should remain always
and everywhere a first-order concern. As discussed in BIS (2023), the public sector has a pivotal role to
play in this regard given the public good nature of cyber security.
5. Conclusion
In this paper, we have laid out a vision for the future financial system. The vision, which we call the Finternet,
puts users of financial services firmly at the centre. They will have access to a wider and more bespoke
selection of financial services and assets, and will have more flexibility in how they manage their financial
affairs. Financial services will be cheap, secure and near-instantaneous. And they will be available to
anyone. The financial system will help individuals and business to manage risk, safeguard their savings and

invest in a better future. While all jurisdictions stand to benefit, the gains could be particularly large for
EMDEs, where lack of access to financial services is currently most pervasive, and the possibility to leapfrog
to the technological frontier is the greatest.
We have also provided a blueprint to guide policymakers seeking to translate this vision into
reality. We identify three necessary components: an efficient economic and financial architecture, the
application of cutting-edge digital technology and a robust legal and governance framework. We see
unified ledgers as a promising vehicle to deliver on all three. In particular, by bringing together multiple
financial assets in a single venue, they offer the possibility of vastly reducing the need for lengthy
messaging and clearing processes, thereby delivering more efficient and reliable services for users.
At the same time, we acknowledge the considerable uncertainty about precisely which innovative
technologies will best serve as a basis for the future financial system, and their best use. Turning the vision
of the Finternet into reality requires experimentation. Only then can we have a full measure of the
challenges and the best strategies to overcome them. Many central banks are engaged in this necessary
process of trial and error. The lessons from these projects are an invaluable public good towards realising
the shared vision of a more efficient, transparent and inclusive financial future. Box F reviews one of the
most recent examples, namely Drex in Brazil, while Box G reviews contributions from the BIS Innovation
Hub related to unified ledgers. Needless to say, many private sector initiatives are also under way.
Box F
Brazil’s Drex: putting the unified ledger into practice
Following the wide success of Pix (see Box B), the Central Bank of Brazil (BCB) has launched Drex, a project for a digital
Brazilian real. Drex is part of the broader BC# agenda, which aims to foster competition in the financial system through
innovation. Also included in that category are Pix, the open finance initiative and internationalisation of the real
(Campos Neto (2023)). The Drex ecosystem includes Drex (central bank money), the Drex platform, its participants and
its rulebook and regulation.
The Drex platform is a unified ledger where wholesale tokenised central bank money, deposits, e-money and treasuries
coexist. The initiative is a collaboration of the BCB, the Brazilian National Treasury, the Brazilian Securities Exchange
Commission and the private sector. It builds on a public-private partnership and leverages the strengths of the current
two-tier monetary system. A key component of the early phase of the project is the so-called Lift Challenge, sponsored
by the BCB, with selected use cases proposed by banks, payment institutions and other market participants. These
include the development of delivery versus payment (DvP), payment versus payment (PvP), the internet of things (IoT)
and decentralised finance (DeFi), among others.
While Drex is perhaps the most advanced initiative towards making unified ledgers a reality, it is certainly not the only
one. Other pioneers include the Bank of Korea, the Monetary Authority of Singapore and the seven central banks that
teamed up with the BIS Innovation Hub in Project Agorá.
A key question is how to proceed. One approach would be to adapt different parts of the financial
system sequentially in a series of incremental steps. There is merit to this approach, particularly in
jurisdictions where financial services are already reasonably efficient and widely accessible. Incremental
progress could lower upfront costs, ensure compatibility with legacy systems and help to secure buy-in
from incumbent financial institutions.
But incremental fixes have their limits. Building a new financial system on old foundations
naturally constrains what it can deliver. Over time, the constraints will bind more tightly – as the financial
system inches forward, the technological frontier will drift ever further away. For this reason, we are inclined
to favour a more transformative adjustment, involving a fundamental rethink of financial infrastructure to
ensure that it can deliver the full benefits that digital technology can offer.
Regardless of how one proceeds, it is time for a “Neil Armstrong” moment – the small first step
that represents a giant leap for the financial system. For this, public institutions can play a catalytic role in

helping financial system development progress from individual experimentation to joint innovation. We
know where we need to go. We have the tools to get there. Now is the time to take the first step.
Box G
Contributions from the BIS Innovation Hub to an architecture for unified ledgers
The implementation of the vision of unified ledgers requires a wide variety of functionalities and technologies
interacting with each other to fulfil its final objective of seamless, integrated financial services. This complex endeavour
is unlikely to be completed by a single entity or with a single solution. Most likely, it will require wide collaboration
among stakeholders using nascent and existent technologies.
The BIS Innovation Hub stands out as a leading reference among the numerous institutions actively
contributing to the evolution of financial services through the exploration of innovative technologies. Its work has
explored many of the functions that would be required for the implementation of unified ledgers: interoperability,
efficient and cross-asset settlement, accessibility, cyber security, fraud and anti-money laundering controls, digital
identity and functional programming of money. These initiatives, designed for both domestic and international
contexts, have benefited from a mix of public and private sector contributions.
 On interoperability, BIS Innovation Hub projects have focused on connecting existing systems and new
ones such as central bank digital currencies (CBDCs). Across borders, Project Nexus created a blueprint to
connect domestic fast payment systems. Projects Jura, Dunbar, mBridge and Mariana explored how to
connect wholesale CBDCs using a common platform, and Project Icebreaker looked at retail CBDCs using a
hub and spoke model.
 Efficient settlement has been explored in CBDC and tokenisation projects as well as in traditional financial
market infrastructures. Beyond the atomic settlement of cross-border payments exemplified in the cross-
border CBDC projects listed above, other experiments broadened the settlement use cases with payment
versus payment (PvP) functions that allowed FX settlement (Projects Mariana and Agora for tokenised
deposits) and delivery versus payment (DvP) (Projects Helvetia, Jura and Promissa). Efficient settlement is
also explored in projects focused on improving traditional FMIs (Projects FuSSE and Meridian).
 Accessibility projects span a wide range of use cases. For example, on the retail CBDC side, Project Rosalind
makes use of standardised APIs to connect central bank ledgers and make private sector systems simpler.
Project Polaris explored offline accesibility for retail CBDCs, a crucial requirement in many jurisdictions.
 On cyber security, Innovation Hub projects have helped shed light on cyber risks in a future era of quantum
computers (Projects Leap and FuSSE) and experimented with developing CBDC systems that are cyber
secure (Project Sela) or that preserve transaction privacy while being resilient to quantum computer attacks
(Project Tourbillon). In addition, Project Polaris developed handbooks that explain the cyber security
landscape and best practices in this space.
 The use of technology has featured in Innovation Hub projects to help green and secure the financial
system. For example, Project Aurora is helping to reduce the flow of illicit transactions. Project Hertha makes
use of AI to help identify financial crime patterns while preserving user privacy within a real-time payment
systems. On the green finance side, Project Genesis aimed to reduce the negative environmental
externalities to the planet by understanding the process of issuing green bonds. In addition, projects have
explored the use of digital identity and signatures for preserving privacy (Projects Tourbillon and Aurum).
 Finally, the power of automation through programming has been explored by embedding regulatory
restrictions in the code (Project Mandala), and by supporting trade finance (Project Dynamo).
These projects have generated, or are generating, useful lessons and solutions that could help bring the vision of
unified ledgers to reality. While some of the projects focused on individual functions, others have brought several
functionalities together. Going forward, it is important to explore the challenges and opportunities related to the
functional integration among these elements and with other developed by different entities.

Glossary
Atomic settlement: instant exchange of assets, such that the transfer of each occurs only upon transfer
of the other.
Auditability: the property that allows digital transactions and activities to be independently verified and
audited for integrity, accuracy and regulatory compliance.
Composability: the capacity to combine different transactions or operations on a programmable platform.
Central bank money: money issued by the central bank, such as banknotes, coins, central bank reserves
or (more recently) tokenised central bank money.
Commercial bank money: money issued by commercial banks in the form of deposits.
Confidentiality: the assurance by a system that sensitive information is disclosed only to authorised users,
safeguarding data privacy and security.
Counterparty risk: the risk that one or more participants will not provide the money or financial assets to
deliver on their side of the transaction.
Cross-border payment: a payment in which the financial institutions of the payer and the payee are
located in different jurisdictions.
Detokenisation: the process of converting recorded claims (represented as tokens) on a programmable
platform back into their original claims on financial or non-financial assets within a traditional ledger.
Digital-first approach: a method for developing payment and other systems that starts from digital
technologies and puts these at the centre of all business operations and customer interactions.
Digital identity: a set of information about a person or company that can be found and used online.
Digital public infrastructure: interoperable, open and inclusive digital systems, supported by technology
to enable the use and provision of essential, society-wide, public and private services.
End users: individuals, households and firms that are not participants in a platform or payment system.
Enforceability: the mechanism by which a system can automatically ensure adherence to legal
agreements, policies or regulatory requirements, reducing the need for manual enforcement.
Fast payment system: a payment system in which the transmission of the payment message and the
availability of final funds to the payee occur in real time or near-real time and on as near to a 24-hour and
seven-day (24/7) basis as possible.
Finality: the moment at which funds or assets, transferred from one account to another, officially become
the legal property of the receiving party.
Financial health: the extent to which a person or family can successfully manage their financial obligations
and have confidence in their financial future.
Financial inclusion: access to and use of transaction accounts and related financial products such as
savings, payment cards, loans and insurance.
Finternet: interconnected financial ecosystems that place individuals and businesses at the centre of their
financial lives, powered by open, interoperable technologies and protocols.
Infrastructure services: existing national or sector-specific infrastructure, including identity systems,
digital signature certificate systems, connectivity, registrars and registries, and digital public infrastructure,
along with any other reusable services available within a country.
Interoperability: the capacity of diverse digital systems, platforms and applications to seamlessly
exchange information, ensuring compatibility across varying technological frameworks.

Immutability: the characteristic of a system that prevents alteration or deletion, ensuring permanent and
tamper-proof record-keeping.
Ledgers: record-keeping systems that guarantee finality and immutability by ensuring that once
transactions are recorded, they cannot be altered, deleted or reversed.
Network of networks: a set of networks where each of these is dedicated to distinct domains and
equipped with unique technological infrastructures, governance protocols and user ecosystems.
Non-repudiability: a security characteristic ensuring that users cannot deny the authenticity of their
actions, supported by irrefutable evidence such as digital signatures or tamper-proof transaction logs.
Observability: the characteristic of a system that provides visibility into necessary transactions and
operations, essential for policymakers, regulatory agencies and participants to effectively monitor for
operational efficiency and compliance, detect fraud and ensure accountability across the ecosystem.
Programmability: a feature of platforms and other technologies whereby actions can be programmed or
automated.
Programmable platform: a technology-agnostic platform that includes a Turing machine with an
execution environment and a ledger and governance rules.
Smart contract: self-executing applications of programmable platforms that can trigger an action if some
pre-specified conditions are met.
Token: a digital representation of value in a programmable platform. Tokens can be tokenised, ie derived
from claims in traditional ledgers, or can be issued natively in the platform, ie “native” tokens.
Tokenisation: the process of recording claims on real or financial assets that exist on a traditional ledger
onto a programmable platform.
Tokenised asset: a digital representation of a claim on an asset in a programmable platform.
Tokenised central bank money: a form of digital money, denominated in the national unit of account,
which is a direct liability of the central bank.
Tokenised deposit: a digital representation of a bank deposit in a programmable platform. A tokenised
deposit represents a claim on a commercial bank, just like a regular deposit.
Token manager: an institution that is responsible for the issuance (tokenisation, detokenisation),
management and synchronisation of a token with their private ledger.
Tokenised network: a platform that operates, clears and settles with tokenised money, tokenised
deposits, tokenised assets or any other form of token.
Turing machine: a finite automaton that can read, write and erase symbols on an infinitely long strip of
tape.
Unified ledger (UL): a digital platform that brings together multiple financial assets as executable objects
on a common programmable platform.
Unified Interledger Protocol (UILP): set of open protocols that defines the messaging specifications
between different unified ledgers to ensure interoperability and finality of transactions between them.
Verifiable identity: a digital representation that enables verification of an individual’s or entity’s identity
through digital means, employing cryptographic methods.

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Previous volumes in this series
1177 Pre-publication revisions of bank financial Andre Guettler, Mahvish Naeem,
March 2024 statements: a novel way to monitor banks? Lars Norden and Bernardus F Nazar
Van Doornik
1176 The effect of Covid pension withdrawals and Carlos Madeira

March 2024 the Universal Guaranteed Pension on the
income of future retirees in Chile
1175 Unmitigated disasters? Risk- sharing and Goetz von Peter, Sebastian von
March 2024 macroeconomic recovery in a large Dahlen, and Sweta Saxena
international panel
1174 The impact of information and Flavia Alves

March 2024 communication technologies on banks, credit
and savings: an examination of Brazil
1173 The macroprudential role of central bank Egemen Eren, Timothy Jackson and
March 2024 balance sheets Giovanni Lombardo
1172 Navigating by falling stars: monetary policy Rodolfo G Campos,

March 2024 with fiscally driven natural rates Jesús Fernández-Villaverde,
Galo Nuño and Peter Paz
1171 DeFi Leverage Lioba Heimbach and Wenqian
March 2024 Huang
1170 Monetary Policy Transmission in Emerging Ariadne Checo, Francesco Grigoli,

March 2024 Makerts: Proverbial Concerns, Novel Evidence and Damiano Sandri
1169 Risk-based pricing in competitive lending Carola Müller, Ragnar E. Juelsrud,

February 2024 markets Henrik Andersen
1168 Corporate payout policy: are financial firms Emmanuel Caiazzo, Leonardo
February 2024 different? Gambacorta, Tommaso Oliviero
and Hyun Song Shin
1167 Monetary Policy with Profit-Driven Inflation Enisse Kharroubi and Frank Smets
February 2024
1166 Tracing the adoption of digital technologies Vatsala Shreeti

February 2024
1165 The Term Structure of Interest Rates in a James Costain, Galo Nuño, and
February 2024 Heterogeneous Monetary Union Carlos Thomas
1164 Public information and stablecoin runs Rashad Ahmed, Iñaki Aldasoro,
January 2024 Chanelle Duley
All volumes are available on our website www.bis.org.

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BIS Working Papers

Monetary and Economic Department

JEL classification: E42, F33, G21, G23.

Keywords: payment systems, financial system, financial

This publication is available on the BIS website (www.bis.org).

ISSN 1020-0959 (print)

Agustín Carstens and Nandan Nilekani1, 2

Finternet: the financial system for the future i

Finternet: the financial system for the future ......................................................................................................................... 1

Box A: Now is the right time for the Finternet....................................................................................................................... 3

2. A vision for a more technologically advanced financial system................................................................... 4

Box C: Lessons from digital public infrastructure in India ............................................................................................... 11

3. From vision to reality ................................................................................................................................................... 12

Box D: Use cases of unified ledgers and tokenisation ...................................................................................................... 17

Box E: Advances in cryptographic and ledger technologies .......................................................................................... 26

4. Design principles ........................................................................................................................................................... 30

Finternet: the financial system for the future iii

iv Finternet: the financial system for the future

Finternet: the financial system for the future 1

2 Finternet: the financial system for the future

Now is the right time for the Finternet

Finternet: the financial system for the future 3

2.1 Shortcomings of the current financial system

Speed: the financial system is too slow

4 Finternet: the financial system for the future

Costs: the financial system is too costly

Finternet: the financial system for the future 5

Access to financial services has improved, but gaps remain Graph 1

Active account ownership

6 Finternet: the financial system for the future

The link between financial inclusion and financial health Graph 2

Saved at / borrowed from FI (%)

Median Interquantile range

2.2 Technology-driven opportunities

Finternet: the financial system for the future 7

Fast payment systems: lessons for digital public infrastructure

Fast payment systems in India and Brazil Graph B1

8 Finternet: the financial system for the future

Finternet: the financial system for the future 9

10 Finternet: the financial system for the future

Lessons from digital public infrastructure in India

Finternet: the financial system for the future 11

3.1 Unified ledgers as a vehicle for an improved financial system

12 Finternet: the financial system for the future

The high-level architecture of the Finternet Graph 4

Source: Authors’ elaboration.

Finternet: the financial system for the future 13

The tokenisation continuum Graph 5

Source: Aldasoro et al (2023).

To understand the transformational possibilities of unified ledgers, consider a simple financial

14 Finternet: the financial system for the future

Source: BIS (2023).

Bank settlement in today’s financial system Graph 7

Source: BIS (2023).

Finternet: the financial system for the future 15

Asset transfers on a unified ledger Graph 8

Source: BIS (2023).

16 Finternet: the financial system for the future

Use cases of unified ledgers and tokenisation