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Citibank's Tony McLaughlin posted an article that isolates a potentially compliant form of the tokenization thesis. This can be tested to determine whether there is a case for the industry to move beyond the current 'messaging' paradigm. The analysis suggests that the 'messaging' paradigm might be augmented by a general purpose 'state machine'. The messaging paradigm generally does not provide participants with unambiguous, authoritative knowledge of the status of a financial transaction throughout its lifecycle. A tokenized system might provide that capability as well as support multi-asset and programmable operations.

The World Bank published a technical paper on on its practical experiments on fast payments system (FPS) interoperability with central bank digital currency (CBDC) systems. The first experiment investigated the option of settling FPS obligations in a wholesale CBDC system, including the option to reserve funds to guarantee the settlement of FPS net obligations. The second experiment investigated the interoperability between users within the FPS and retail CBDC users, including the transfer of funds among both types of users, using common services such as address resolution services. This experiment illustrated how CBDC systems could interoperate with retail payment systems through an interlinking bridge that was used to route messages and application programming interface (API) calls among different systems. The programmability features of distributed ledger technology (DLT) were used to link the settlement in CBDC to the transfer of funds in the FPS.

The Bank of Russia is expanding its central bank digital currency (CBDC) pilot programme. The new phase, which started on September 1, 2024, will involve up to 9,000 people and 1,200 companies, versus the 600 people and 22 firms that took part in the previous stage. The latest phase will enable dynamic QR code payments and business-to-business transfers. Digital ruble transactions will be available to the customers of the same 12 banks that have been participating in the pilot testing since its start in August 2023, and more banks will be added.

Reserve Bank of India (RBI) Governor Shaktikanta Das says that the retail central bank digital currency (CBDC) pilot has over 5 million users and 16 banks participating. Programmability functionalities are also being tested, and new use cases aimed at testing features such as anonymity and offline availability are proposed to be rolled out gradually. He also said that there should not be in any rush to roll out a system-wide CBDC until a comprehensive understanding of its impact on users, on monetary policy, on the financial system and on the economy. Such understanding would emerge from generation of user data in pilots.

The National Bank of Kazakhstan (NBK) has entered a new phase of its digital tenge project by introducing the concept of programmable money for government spending. The central bank has been actively engaging with the Ministry of Finance, including the Treasury and Tax Authority, to integrate their systems with the digital tenge platform. This will enable pilots for transparent public procurement, social digital vouchers, and other innovative scenarios. The NBK is finding that the combination of electronic procurement, digital treasury, digital tax administration, and smart payment rails can significantly increase the efficiency and transparency of public finances.

The United Nations Development Programme (UNDP) published an article by Heng Wang on potential central bank digital currency (CBDC) design features that drive financial inclusion. From users' perspectives, CBDCs need to (i) provide low-cost and safe electronic payment services and to provide benefits like accessibility for vulnerable people, (ii) align with values, experiences, and needs of potential users, and address concerns like privacy, safety, (iii) simplify access to CBDCs (especially for vulnerable groups), easy access to CBDC wallets, user-friendly interfaces, clear terms and conditions, (iv) be tested comprehensively through pilots and sandboxes to refine their design and ensure safety, and (v) the benefits and costs should be visible and understood by users.

The Bank for International Settlements (BIS) published a Committee on Payments and Market Infrastructures (CPMI) report that sets out the concepts related to digital tokens and programmable platforms. Tokenization arrangements can change existing market structures by providing platform-based intermediation across the end-to-end life cycle of financial assets. While this could decrease transaction costs and enable innovative use cases, the potential of token arrangements to improve the safety and efficiency of the financial system will require sound governance and risk management. The risks typically associated with financial market infrastructures also apply to token arrangements, but they may materialise differently. Developments in tokenisation offer an opportunity for central banks to reflect on the role of central bank money in the digitalising financial system.

The National Bank of Kazakhstan (NBK) in collaboration with the State Revenue Committee (Tax Authority) of the Ministry of Finance has launched a Digital Tenge pilot project focused on value-added tax (VAT) reimbursement for exporters. This initiative leverages the programmability of central bank digital currency (CBDC) to automatically mark VAT in business-to-business (B2B) transactions. By doing so, the need for manual checks by tax authorities, is eliminated, significantly streamlining the reimbursement process. It reduced the reimbursement time from 70-75 working days to 10-15 days, with the goal of achieving instant reimbursement in the near future. In total, approximately 40 billion worth of Digital Tenge is now in circulation in the various pilot projects.

Bank Indonesia (BI) published its Indonesian Payment System Blueprint (BSPI) 2030, in which it provides an update on its digital rupiah central bank digital currency (CBDC) work. The central bank completed the first of three proof of concept phases CBDC work during the first half of 2024, the basic issuance and redemption of a distributed ledger technology (DLT) based wholesale CBDC . The BI is now readying to start the second phase in which it plans to explore the integration of a wCBDC with a digital securities ledger to test issuing, transferring and redeeming digital securities, conduct central bank operations, and extending the functionality of digital securities, including programmability, composability and tokenization. https://www.bi.go.id/id/publikasi/kajian/Pages/Blueprint-Sistem-Pembayaran-Indonesia-2030.aspx

The Bank of Ghana (BOG) confirmed the completion of the Project Digital Economy Semi-Fungible Token (DESFT), a joint project with the Monetary Authority of Singapore (MAS) and the United Nations Development Programme (UNDP). The first phase saw the development of the blockchain-based Universal Trusted Credentials (UTC) system that enables micro, small and medium enterprises (MSMEs) to efficiently verify authenticity of key information, such as basic credentials, licenses, certificates, and trade records across borders. In the second phase, a cross-border payment was made using UTCs, the eCedi CBDC and a Singapore dollar stablecoin, using the purpose-bound money (PBM) protocol.

The Securities Industry and Financial Markets Association (SIFMA) published the results of Regulated Settlement Network (RSN) proof-of-concept that explored the possibilities for shared ledger-based digital settlement using U.S. Treasury securities and tokenized cash. It found that multi-asset and cross-network settlement could be enhanced through a shared-ledger financial market infrastructure (FMI) that contains tokenized securities, central bank deposits, and commercial bank deposits where each institution operates its own partition. The network enabled a common settlement infrastructure that is 24/7, programmable, and offered precise settlement capabilities to allow financial institutions to optimize their collateral and liquidity positions. At the same time, the network alleviated challenges such as market fragmentation and uncertainty throughout the settlement process.

Bangko Sentral ng Pilipinas and participating financial institutions (FIs) have completed proof-of-concept work on Project Agila. Agila allow FIs to transfer funds to each other even during off-business hours, including evenings, weekends, and holidays, using wholesale central bank digital currency (CBDC). The evaluation with FIs covered functional, performance, security, exploratory, end-to-end and programmability testing.

The Cambridge Centre for Alternative Finance (CCAF) published a report that examines the key motivations, models, and policy considerations for wholesale central bank digital currency (CBDC). It discusses the need for wholesale CBDCs as risk-free settlement assets to support digital transaction infrastructure and mitigate potential instability arising from reliance on tokenized private assets. Central banks are considering wholesale CBDCs as an alternative to upgrading real-time gross settlement (RTGS) systems, aiming to keep pace with programmable, always-on infrastructures that facilitate real-time, cross-currency liquidity and tokenized asset transactions.

Banco Central do Brasil (BCB) published a technical report on the first phase of the Drex wholesale central bank digital currency (CBDC) pilot that focused on testing the use of tokenized deposits. The platform used was a private, permissioned version of the Ethereum blockchain. The pilot involved the participation of 16 financial institutions, which were selected from a pool of 36 candidates. The pilot tested a range of use cases, including the issuance and transfer of tokenized deposits, as well as the settlement of transactions involving tokenized government bonds. BCB found a tough "trilemma" between privacy, programmability, and oversight. Advanced cryptography (like zero-knowledge proofs) can hide transaction details to protect user privacy, but this also makes it hard for regulators to monitor illicit activity or even for the system to run complex smart contracts. The next phase of the pilot program will focus on advancing privacy while allowing pilot participants to suggest more use cases.

The Linux Foundation published an updated report on how its open-source distributed ledger technologies (DLTs) are powering central bank digital currency (CBDC) initiatives globally. It explains the advantages of open source development for CBDC projects, emphasizing transparency, collaboration, and the adaptability of community-driven solutions. The paper also showcases projects using Hyperledger Fabric, Besu, Iroha, and other tools across various implementation stages-from research (European Central Bank, France, Norway) to pilots (India, Brazil, Philippines) to live deployments (Nigeria, Eastern Caribbean). These implementations demonstrate how open-source blockchain technologies can improve payment efficiency, enhance security, enable programmability through smart contracts, and support financial inclusion.

Coinbase published a paper that argues that the global financial system requires an update built upon permissionless systems, with tokenization at its core. They argue that building on open architecture provides benefits such as instant settlement, elimination of outdated processes, self-custody, increased transparency, improved transaction speed, programmability, and enhanced security and privacy through techniques like zero-knowledge proofs. The paper emphasizes the importance of base layer neutrality for fostering innovation and competition, while also addressing policy considerations such as integrating with traditional finance, enabling the tokenization of traditional assets, and recognizing the right to self-custody.

Banco Central do Brasil (BCB) published a report on the main developments in the first phase of its Drex wholesale central bank digital currency (CBDC) proof-of-concept (POC) work, which took place between July 2023 and October 2024. (None of the Drex POC tests involved real clients or assets, but rather fictitious ones.) The report highlighted the trilemma of finding a solution that balances decentralization, programmability, and privacy issues at the same time, while being compliant to the Brazilian legal framework. I'm still digesting a Google Translate version (it's only available in Portuguese) of the 73-page report, and may come back with more detail later.

Valor Economico is reporting that some of the firms involved in the Banco Central do Brasil Drex (BCB) wholesale central bank digital currency (CBDC) project are reducing resource commitments to it. This is reportedly due to frustrations with the BCB's privacy requirements to hide transaction data from all the banks involved except the one that is executing it, while allowing the BCB to see everything and be able to reverse transaction with a court order to that effect. All this must be achieved without harming the digital currency's programmability and composability allowed by its distributed ledger technology (DLT) based platform.

Fnality has released a new "Earmarking" feature that allows banks to program funds for release upon receipt of proof of an event elsewhere. For example, institutions will be able to systematically program when funds move in exchange for a specified asset, or a related market event. A proof is a cryptographically signed piece of data representing specific information from another system, triggering the release of the £FnPS's digital representation of central bank funds. When an Earmark is in place prior to its release, the funds remain on the originating participant's balance sheet at all times. https://fnality.com/news/earmarked-funds

Ulrich Bindseil (European Central Bank) and Omid Malekan (Columbia University Business School) posted a paper that discusses the properties of blockchain technology and how they can enable time structures and novel financial products that cannot exist in traditional financial architecture. The specific features described are streaming payments, omni-asset settlement, programmability, and financial architecture flattening (disintermediation). They provide examples of the unique products they enable, some of which might disrupt today's dominant payment and capital market solutions in the future. The authors also discuss the utility of blockchain technology in private (permissioned) networks, and the risks of public distributed ledger technology (DLT) networks and their mitigants.