jakiro
Author: Zhang Feng
At the Singapore FinTech Festival in November 2025, Andréa M. Maechler, Vice President of the Bank for International Settlements (BIS) and Acting Head of the BIS Innovation Center, delivered a thought-provoking speech focusing on “tokenization”, a key trend that is reshaping the global financial system.
In her speech, she not only clarified the definition and mechanism of tokenization, but also revealed how it promotes payment system innovation and generates new business models through programmable platforms. We believe that her speech also provides an important thinking framework for regulatory agencies.
1. What is tokenization?From static records to dynamic programmable assets
Tokenization, in a nutshell, isThe process of converting static ownership records of financial assets – such as deposits, bonds, notes, etc. – into digital tokens that are verifiable, transferable, and can run on a programmable platform.This process is not simply digitization, but gives assets a digital identity in the form of “tokens” through blockchain or distributed ledger technology, making them divisible, traceable, and programmable.
In the traditional financial system, asset records are mostly centralized, isolated and lagging in updates.For example, a cross-border payment may need to go through multiple banks, multiple clearing systems, and go through multiple links such as messaging, reconciliation, and settlement, which takes several days and is costly.Tokenization enables assets to flow and interact in real time on an open, programmable platform by creating cryptographically guaranteed digital tokens that correspond one-to-one to the underlying assets.
ProgrammabilityIt is one of the core features of tokenization.This means that tokens can not only represent value, but can also embed smart contracts—code logic that executes automatically.For example, tokens can be programmed to automatically pay interest at specific times, or automatically transfer ownership when certain conditions are met.This programmability brings unprecedented automation and precision to financial transactions.
2. How to tokenize?Mechanisms, platforms and typical cases
The implementation of tokenization does not happen overnight and relies on several key elements: asset on-chain, token minting, platform integration and compliance framework.In his speech, Mechler took the “Agorá Project” of the BIS Innovation Center as an example to vividly demonstrate the practical path of tokenization in cross-border payments.
(1) Technical implementation path of tokenization
Asset identification and anchoring.First, it is necessary to clarify the assets being tokenized and establish a reliable and auditable correspondence between them and digital tokens.This is usually secured through a legal agreement combined with technical credentials.
Token minting and issuance.A token representing the asset is issued on an eligible programmable platform, such as a permissioned blockchain.These tokens must comply with relevant financial and securities regulations.
Platform integration and interaction.Tokens need to run on a platform that supports smart contracts to interoperate with other tokens, payment systems, traditional ledgers, etc.
Clearing and settlement automation.Smart contracts are used to bundle transaction instructions, asset transfer, fund settlement and other steps to achieve “atomic settlement” – that is, all steps succeed or fail at the same time, eliminating counterparty risks.
(2) Agorá Project: How Tokenization Reshapes Cross-Border Payments
The Agorá project is a flagship initiative promoted by BIS in partnership with seven central banks and more than 40 financial institutions.This project willTokenized deposits(numeric representation of commercial bank deposits) vs.Tokenized reserves(digital representation of central bank money) integrated into the same programmable platform.In the cross-border payment scenario, the tokenized deposit of the payer and the tokenized deposit of the payee can be instantly exchanged through smart contracts, and the final settlement can be completed in real time with central bank currency, and the whole process is compressed into one atomic operation.
This approach significantly reduces delays, costs and risks in cross-border payments, while improving transparency and traceability.Mechler pointed out that such experiments provide key technology and governance templates for future large-scale applications.
3. The value of tokenization: efficiency improvements and the emergence of new business models
The reason why tokenization is highly valued by international institutions such as BIS is precisely because it can create value in multiple dimensions:
(1) Efficiency improvement and cost reduction
In traditional financial transactions, reconciliation, clearing, settlement and other links involve a large number of manual and intermediary operations.Tokenization significantly reduces processing time, operational risks and compliance costs through automation and atomic settlement.Mechler emphasized that such efficiency gains could bring “huge systemic gains”, especially in a cross-border context.
(2) New business models and financial products
Tokenization is opening up a range of unprecedented application scenarios:
Tokenization of the bond market.The global government bond market is approximately US$80 trillion. Tokenization can automate the entire process of issuance, trading, interest payment, and redemption, improve liquidity and lower entry barriers.
Artificial Intelligence and Internet of Things Payment.Programmable tokens can be combined with AI agents to realize real-time, high-frequency micropayments between machines (such as automatic charging of electric vehicles), or automatically perform invoice settlement in trade finance.
Digitization of traditional tools.For example, the “Commitment Project” jointly conducted by BIS and the World Bank aims to tokenize the paper promissory notes used by governments to inject capital into multilateral development banks to improve the efficiency and transparency of fund transfers.
(3) Financial inclusion and market integrity
Tokenization can also reach areas that are underserved by traditional finance.By reducing transaction costs and improving credibility, it can enable small and medium-sized enterprises and individual investors to participate in global financial markets more conveniently, while enhancing anti-money laundering and anti-corruption capabilities through traceability.
4. The deeper meaning of BIS Vice President’s discussion: logic, operation, fraud detection and supervision
Mechler’s speech is not only a description of technological trends, but also implies a complete cognitive framework of tokenization:
Revealing the underlying logic of tokenization.She made it clear that the essence of tokenization isReimagine financial processes through programmability and composability.This not only involves technological upgrading, but also a systematic reflection on the role of financial intermediaries, currency forms, and contract execution methods.
Clarify the operational path for asset tokenization.It can be seen from projects such as Agorá that for now, successful tokenization must use central bank currency as the final settlement asset to ensure a credit foundation; be promoted on a regulated and interoperable platform; and focus on connecting with traditional systems to avoid fragmentation.
Propose a counterfeiting and quality assurance mechanism for tokenized assets.Tokenization does not automatically solve the trust problem.Mechler hinted that the authenticity and quality of tokens must be ensured through the following methods: sound legal statements and asset endorsements; transparent issuance and redemption mechanisms; independent auditing and on-chain verification tools; and supervision of issuers and platforms by regulatory agencies.
Provide reference for the supervision of tokenized assets.She mentioned that recent regulatory progress in various countries in the field of tokenized currencies (such as stablecoins) has provided a legal basis for a wider range of asset tokenization.Supervision should focus on: clarifying the legal attributes of tokens and investor protection; preventing fragmentation and systemic risks; encouraging cross-jurisdictional cooperation and unification of standards.
5. Challenges and future prospects
Despite the momentum behind tokenization, Mechler is sober as to note that it’s still early days in the transformation.The actual deployment of tokenized deposits is still limited, and large-scale promotion still faces multiple challenges such as technical interoperability, legal certainty, and regulatory coordination.In addition, how to balance innovation and financial stability, and how to design a platform architecture that takes into account both openness and security, are still issues to be solved.
However, the direction is clear.Tokenization represents a more efficient, transparent, and inclusive financial future.As Mechler emphasized,This is not just an evolution of technology, but a paradigm shift in financial infrastructure.Central banks, commercial banks, technology companies and regulatory agencies must jointly explore and advance prudently to ensure that this change truly serves the stability and development of the global economy.
The Bank for International Settlements provides an authoritative and clear roadmap for our understanding of tokenization through its executives’ forward-looking discussions and innovative experiments.Tokenization is not a distant science fiction scenario, but a financial reality that is happening right now.It redefines the way assets flow, reconstructs the mechanism of trust, and reshapes the boundaries of financial services.For policymakers, financial institutions and market participants, understanding what tokenization is and how to achieve tokenization has become a required course to embrace the next financial era.
