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As technology increasingly integrates itself into the foundational structures of existing systems, it evolves from being a mere tool to a fundamental driving force that alters the very frameworks upon which these systems have long depended. A unified ledger is a digital financial system designed to enable seamless transactions across various types of financial assets and platforms. It operates on a decentralised framework that allows participants to engage with different ledgers, facilitating interoperability between diverse financial systems such as banks, crypto platforms, and traditional financial networks. This ledger ensures the integrity of transactions, offering transparency, finality, and security through advanced cryptography.
A unified ledger is a digital financial system designed to enable seamless transactions across various types of financial assets and platforms.
A recent Bank for International Settlements (BIS) whitepaper envisions the “Finternet” as a decentralised network of interconnected financial ecosystems, positioning individuals and businesses at its core, akin to the internet's structure. Many of the technologies required for the Finternet are already in development and evolving rapidly. Its successful implementation depends on the collaboration between public authorities and the private sector to establish a robust regulatory and economic framework. This collaboration could create a unified, inclusive financial ecosystem, democratising finance and enhancing efficiency to meet the needs of all key stakeholders.
Current challenges
Despite significant advancements in communication and information technology, the financial system remains hampered by inefficiencies that continue to undermine its potential. While retail payment systems have evolved and become faster, many core financial transactions, particularly those involving assets such as shares and bonds, still face considerable delays in settlement. This delay is primarily caused by outdated clearing, messaging, and settlement systems, alongside siloed proprietary databases and inconsistent technical standards, which result in slow processing times. Additionally, the compliance burden—specifically related to anti-money laundering regulations—further exacerbates these inefficiencies, requiring repetitive identity verifications that add unnecessary complexity to legitimate transactions.
Companies are forced to maintain large cash reserves or rely on expensive credit to manage working capital, while individuals often face long delays in receiving wages or government transfers, which may force them to resort to high-interest loans.
These inefficiencies—slow settlement times, high transaction costs, and the lack of competitive alternatives—pose substantial challenges to businesses and individuals alike. Companies are forced to maintain large cash reserves or rely on expensive credit to manage working capital, while individuals often face long delays in receiving wages or government transfers, which may force them to resort to high-interest loans. Antiquated systems and manual processes introduce operational errors and delays, raising costs and eroding efficiency. The issues highlighted above may not be universally pervasive but are emblematic of persistent challenges within many financial systems globally. While it would be inaccurate to suggest that the global financial machinery has come to a halt due to these inefficiencies, their existence underscores the need for continued innovation.
How unified ledgers work
A unified ledger is a digital financial system designed to streamline transactions across multiple financial platforms by ensuring seamless interoperability. The unified ledger seeks to ensure transaction integrity across all ledgers. With features like trusted user identities, digital signatures, and the ability to operate across different platforms, it aims to improve both accessibility and security in financial transactions. This system also addresses key inefficiencies in the traditional financial infrastructure, such as redundant identity verification and slow settlement times. Moreover, unified ledgers are capable of managing a wide range of asset types, from real estate to digital tokens, each with varying regulatory standards and protections. By streamlining processes and enhancing access, this technology has the potential to transform finance, making it more inclusive, efficient, and adaptable to global demands.
Regulating the Finternet
The successful implementation of the Finternet, including unified ledgers, necessitates the creation of a comprehensive legal, regulatory, and governance framework to safeguard participants and ensure the integrity of the financial system. Without such measures, the Finternet could lose the confidence of consumers, businesses, and society at large. Existing laws must be extended to cover participants and assets within the Finternet, ensuring that unified ledgers do not enable regulatory loopholes. However, the introduction of unified ledgers presents new legal challenges, such as determining whether central banks can issue tokenised central bank money, or ambiguity in the classification and taxation of tokenised assets.
Existing laws must be extended to cover participants and assets within the Finternet, ensuring that unified ledgers do not enable regulatory loopholes.
Some regions may need to adjust their legal frameworks to accommodate the unique characteristics of tokenised assets, while others may seize the opportunity to introduce new regulations that encourage competition and interoperability. Governance issues, related to the ownership and control of the ledger, the role of financial institutions, and transaction rules, also arise.
Promises for the future?
The transition to a unified ledger system, while offering significant potential for improving financial efficiency and inclusion, raises important concerns regarding financial stability. A rapid or unregulated shift to such a system could introduce substantial risks to the integrity of the financial system. The assumption that technology alone can resolve deep-rooted issues of trust and governance within the financial system may be misguided. Decentralisation, in particular, could inadvertently erode the accountability and oversight that central banks and regulators currently provide. While decentralised ledgers enhance transparency, they lack a central authority, making it more challenging to prevent fraud, market manipulation, and systemic risks, particularly in cross-border transactions. The governance structures of such systems become critical, and accountability for failures needs to be clearly defined.
The legal and regulatory frameworks that underpin financial systems must evolve in response to the implementation of unified ledgers. Without clarity on the legal status of tokenised assets, and without consistent regulation for cross-border transactions, there is a risk of creating a fragmented regulatory environment that could undermine the stability of the global financial system. The uncertainty surrounding the regulatory treatment of such assets may invite regulatory arbitrage, where bad actors exploit regulatory discrepancies. To ensure legitimacy and secure transactions across jurisdictions, robust compliance frameworks must be established, encompassing anti-money laundering (AML) and know-your-customer (KYC) standards. The global coordination of central banks and financial regulators is necessary to avoid fragmentation in the legal and regulatory landscape.
The uncertainty surrounding the regulatory treatment of such assets may invite regulatory arbitrage, where bad actors exploit regulatory discrepancies.
The absence of international regulatory alignment could pose long-term risks to systemic stability. While unified ledgers may provide efficiency gains, they also introduce new vulnerabilities, particularly in terms of cybersecurity. If the underlying technology were to fail or be compromised, it could threaten the entire financial system. Additionally, the widespread reliance on digital infrastructure risks creating a digital divide, where those with limited access to technology or insufficient digital literacy are excluded from participating in the financial system. Therefore, the development of social infrastructure—such as education, digital literacy, and internet access—must accompany technological advancements, to ensure equitable access to the benefits of unified ledgers.
While technological advancements in financial systems promise improvements in efficiency, inclusivity, and resilience, several critical challenges must be addressed before these innovations can be fully realised. The potential of unified ledgers to transform finance is impressive, but geopolitical tensions and the political will to implement such systems pose significant obstacles. Achieving global standardisation remains a major challenge, as governments, regulators, and multilateral organisations have yet to align on universally accepted frameworks. This raises doubts about the feasibility of rapid implementation. Furthermore, disparities in access to technology across regions could hinder widespread adoption. While the issues outlined in the whitepaper are valid, they have not prevented the global financial system from functioning effectively.
This prompts the question: is this a problem looking for a solution or a solution in search of a problem? A solution in search of a problem shouldn't be viewed negatively. New technological solutions that enhance traditional methods should be actively encouraged. The underlying innovations in these technologies possess a tremendous, albeit uncertain, potential—one that should not be casually dismissed. Their societal and economic impact could be significant, but only if they are allowed to evolve through trial and error, in real-world conditions, not constrained by rigid models or theoretical constructs.
Sauradeep Bag is an Associate Fellow with the Centre for Security, Strategy, and Technology at the Observer Research Foundation.
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