Project Promissa, a collaboration between the Bank for International Settlements' Innovation Hub, the Swiss National Bank, and the World Bank, has demonstrated that paper-based promissory notes can be redesigned using distributed ledger technology (DLT) to address operational challenges that make the process time-consuming and cumbersome.
Since their creation, Mult-lateral development banks (MDB) like the World Bank and others have used promissory notes to track and encash multi-year financial commitments from member countries in a process that is overly complicated and requires constant reconciliation. The volume of promissory notes across MDBs is significant, representing a substantial portion of contributions pledged by member countries.
Project Promissa developed a Proof of Concept (PoC) platform for tokenised promissory notes, enabling more efficient management of the notes throughout their lifecycle, from issuance to payment and archiving, thereby automating manual processes and reducing time and costs.
Morten Bech, head of the BIS Innovation Hub's Swiss Centre, says: "Project Promissa is a clear example of how blockchain can be used for the public good. Paper-based promissory notes have been in place since the Bretton Woods institutions were established, helping to finance their important activities worldwide. The digital solutions tested by Promissa represent a significant step forward in modernising this process in a cost-effective manner."
The DLT platform ensures users have a single source of truth, enables multiparty signatures and guarantees confidentiality while maintaining each party's ownership, control and decision-making power over its promissory notes, he says.
Participants from seven countries contributed to the testing and gave feedback to improve the PoC.
Thomas Moser, alternate member of the Governing Board, Swiss National Bank, comments: "As the custodian of Switzerland's promissory notes, we value the digitisation of our operations through distributed ledger technology. Project Promissa points to a unique opportunity to modernise error-prone paper processes and establish a single source of truth, significantly reducing reconciliation needs and enhancing efficiency."