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Three major global institutions, the International Monetary Fund (IMF), the World Bank, and the Bank for International Settlements (BIS), are collaborating for the first time to explore the tokenization of some financial instruments that underpin their worldwide operations. 

The collaboration will also involve Switzerland’s central bank, which has been at the forefront of tokenization efforts.

Tokenization is the process of converting traditional assets into uniquely coded tokens that can be utilized in more efficient systems. 

The initial focus of the partnership will be on simplifying paper-based processes, such as when wealthier countries contribute to some of the World Bank’s funds to support less developed regions.

The original pledge can take the form of a promissory note, which could be tokenized to facilitate easier transfers when needed. 

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BIS official Cecilia Skingsley, speaking at a conference hosted by the Atlantic Council think tank in Washington, stated that the collaboration aims to streamline the process of making development funds available for emerging and developing economies.

Skingsley also mentioned that tokenization could enable the encoding of policy and regulatory requirements into a common protocol for addressing issues like international money laundering. 

Additionally, she discussed the emerging central bank digital currencies (CBDCs) and reiterated the need for global rules and technology standards to ensure their interoperability with existing payment systems and across borders.

However, Skingsley acknowledged that questions remain regarding the implementation of these standards and their adaptability to work with non-CBDC systems.

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