Central Bank Money Tokenization

Definition ∞ Central bank money tokenization refers to the process of representing a central bank digital currency (CBDC) or reserves as digital tokens on a distributed ledger technology (DLT) platform. This mechanism allows central bank liabilities to be held and transferred in a tokenized format, potentially streamlining wholesale financial transactions and interbank settlements. It maintains the direct liability of the central bank, ensuring ultimate settlement finality and sovereign backing. This innovation aims to modernize monetary systems and enhance payment efficiencies.
Context ∞ The concept of central bank money tokenization is a central discussion point for global financial authorities exploring the future of money and payments. Key considerations include the design choices for such tokens, their interoperability with existing financial infrastructures, and their potential impact on monetary policy and financial stability. Many central banks are conducting pilot programs and research to assess the operational feasibility and policy implications, indicating a critical period of development that could reshape wholesale finance.