The paper explores risks stemming from the new technology such as security, governance, technology and compliance risks.

To address the risks identified, the paper highlights several mitigants:

• Business Continuity Planning to address governance risks, technology/attack risks, and policy/legal uncertainty.
• Technology-based control over parties and transactions to address legal/compliance risks.
• Permissioning a subset of node infrastructure to address legal/compliance risks, technology/attack risks, and consumer protection risks.
• Technology to address privacy/confidentiality/consumer protection.
• Technology to address liquidity risk.

The paper notes that current practices for mitigating risks are at various stages of development and have not yet been tested under stress.

A special chapter in the Annual Economic Report 2023 sets out a "blueprint for the future" by "rethinking the existing pillars of the current monetary system."

According to the press release, a "unified ledger would combine tokenised forms of central bank digital currency (CBDC) with tokenised bank deposits and other tokenised claims, opening up a new era in the joint development of the monetary system and the economy."

The special chapter highlights how the future monetary and financial system will improve on the old and enable the new. Examples of possible innovations include: 

• "New methods for securities settlements that combine all the individual steps into one seamless transaction.
• "Tokenised deposits with built-in regulatory checks that simultaneously settle in wholesale CBDC.
• "Smart contract-enabled credit that reduces the cost of trade finance for smaller companies, improving global supply chains.
• "Enhanced sharing of data on potential borrowers, using privacy-protecting technology, to expand access to credit for disadvantaged segments of the population."

Economic Adviser and Head of Research at the BIS Hyun Song Shin said: "We are at the cusp of another major leap in the monetary and financial system, which will have far-reaching consequences for the economy and society at large. Bringing together central bank money, commercial money, and different assets on the same platform, all tokenised and interacting, opens up a whole new range of possibilities. This would be a game-changer in how we think about money and how transactions take place."

Unbacked cryptoassets and stablecoins with ineffective stabilisation mechanisms will be subject to a "conservative prudential treatment." 

The standard will provide a "robust and prudent global regulatory framework for internationally active banks' exposures to cryptoassets that promotes responsible innovation while preserving financial stability." 

The standard, which will be incorporated as a new chapter titled 'SCO60: Cryptoasset exposures' into the consolidated Basel Framework, will be implemented by 1 January 2025. 

The Committee will be monitoring the implementation and effects of the standard.

The paper examines the views of central banks in the Latin American and Caribbean (LAC) region toward CBDCs, drawing on their responses to a survey conducted by the BIS in 2020 and 2021.

It examines whether the engagement of LAC central banks with CBDCs can be explained by the structural characteristics of their economies.

The paper also reviews the list of potential benefits, costs and risks of CBDCs, focusing on their relevance to the LAC economies.

Finally, the paper reviews the design choices that central banks face and the actual choices made by a number of central banks in the region.

The review said that even though links with traditional finance are currently contained, "DeFi warrants closer monitoring because of high leverage, limited shock-absorbing capacity and built-in interconnectedness".