Bank Ledger Token

Definition ∞ A bank ledger token is a digital representation of value issued by a financial institution on a distributed ledger technology. These tokens typically represent claims on fiat currency held in reserve by the issuing bank, functioning as a form of digital money within a controlled ecosystem. They facilitate efficient interbank settlements and wholesale transactions, leveraging blockchain characteristics such as immutability and programmable logic. This innovation offers a method for banks to streamline operations and reduce counterparty risk in financial transfers.
Context ∞ The discussion around bank ledger tokens often involves central bank digital currencies and their potential impact on existing financial infrastructures. Institutions are exploring how these tokens can enhance payment systems and liquidity management, particularly in cross-border transactions. Regulatory frameworks are under construction to govern their issuance, transfer, and overall operational parameters within traditional financial markets. This area represents a significant intersection of traditional finance and distributed ledger technology.