How Central Banks and Regulators Are Upgrading Payment and Settlement Infrastructure for a Digital Era: The Latest Developments

As the global financial ecosystem accelerates its transformation into a digital-first environment, central banks and regulatory authorities are actively spearheading initiatives to overhaul foundational payment and settlement systems. These efforts aim to foster a more resilient, efficient, and interconnected financial infrastructure capable of supporting trillions of dollars in daily transactions, amid rising technological innovation, regulatory evolution, and emerging risks.

Central Banks Leading Infrastructure Modernization

Central banks remain at the forefront of this evolution, deploying advanced technologies and experimental frameworks to enhance security, speed, and resilience:

• RTGS System Upgrades and DLT Experiments:
  The Bank of England (BoE) has advanced its RTGS modernization program, integrating Distributed Ledger Technology (DLT) through collaborative experiments involving over 18 industry stakeholders. These initiatives explore how tokenized assets can be settled efficiently within existing frameworks, aiming to reduce operational costs and accelerate settlement times. A senior official remarked, “Our DLT experiments are critical to understanding how to incorporate new technologies into our core systems without jeopardizing stability,” reflecting a cautious yet progressive approach.

• CBDC Development and Pilots:
  The BoE has made significant progress with its Digital Pound (Britcoin) pilot, evaluating technical feasibility, user experience, and interoperability. Similarly, the European Central Bank (ECB) continues its digital euro project, despite uncertainties stemming from President Christine Lagarde’s potential early departure, which could influence project timelines. The ECB remains committed to public consultations and pilot testing, aiming to establish a resilient infrastructure ready for deployment.

• Cross-Border Digital Initiatives:
  The Bundesbank promotes digital euro and stablecoin initiatives aligned with Europe’s broader digital monetary strategy. In the UK, the government, in partnership with HSBC, is pioneering a digital gilt pilot, issuing sovereign bonds on blockchain platforms. This move aims to reduce operational costs, enhance transparency, and streamline government debt issuance, marking a significant step toward integrating digital assets into public finance.

• U.S. Federal Reserve’s Progressive Steps:
  The Federal Reserve is expanding access to master accounts for nonbank entities, including fintech firms and digital asset platforms, with a planned rollout by 2026. Its ongoing blockchain collaborations with Chainlink aim to facilitate settlement of tokenized assets and advance CBDC research, positioning the U.S. as a key player in the emerging digital currency ecosystem.

Transition from Pilot Projects to Operational Markets with Tokenization

The shift from experimental pilots to real-world operational markets is accelerating, driven by the expanding tokenization of assets:

• Tokenized Funds and Securities:
  Major asset managers like BNP Paribas Asset Management are issuing tokenized fund shares, such as a tokenized share class of a French money market fund on Ethereum. This innovation aims to reduce operational complexity, increase transparency, and enable fractional ownership, signaling a move toward blockchain-enabled settlement for traditional assets.

• High-Value Asset Tokenization:
  Platforms like ETHZilla are facilitating tokenized aircraft engine leasing agreements worth $12.2 million. Such deals exemplify how tokenization can enhance liquidity and broaden access beyond institutional investors to a more diverse participant base.

• Mainstream Corporate Use of Stablecoins:
  Companies including Elemental Royalty, a precious metals royalties firm, are distributing dividends via Tether’s XAUT, a stablecoin backed by gold. This demonstrates corporate adoption of stablecoins, offering faster settlement, cost savings, and improved liquidity management.

• Market Infrastructure Upgrades:
  Major exchanges and derivatives platforms are shifting toward 24/7 trading to meet institutional demand for continuous market access. For example, CME plans to launch 24/7 crypto derivatives trading in May, reflecting growing operational maturity in digital asset markets.

• Industry Standards Development:
  Industry groups have issued guidelines on tokenomics, emphasizing transparency, security, and sustainability, which are pivotal for building investor confidence and ensuring long-term stability in digital markets.

Regulatory Environment: Balancing Innovation and Risks

Regulators worldwide are actively shaping policies to foster innovation, protect consumers, and mitigate risks:

• Stablecoin Policies and White House Initiatives:
  The White House has proposed limits on stablecoin rewards, collaborating with banking partners to manage associated risks. Concurrently, TRM Labs reports that illicit stablecoin activity surged to $141 billion in 2025, a five-year high, highlighting ongoing challenges in financial crime prevention.

• Legislative and Tax Policy Developments:
  The U.S. Securities and Exchange Commission (SEC) has issued clarifications that tokenized securities must comply with existing securities laws. Legislation like the CLARITY Act, supported by Senator Bernie Moreno, is expected to provide greater legal certainty, encouraging broader participation and innovation in digital assets.
  Additionally, the Netherlands is considering modifications to its controversial crypto unrealized gains tax law. On February 26, Dutch Finance Minister Eelco Heinen announced plans to revise the law, which currently requires investors to pay a 36% tax on paper gains even without selling the assets. This move aims to address concerns over tax fairness and market stability.

• Industry Engagement and International Coordination:
  Initiatives like Hyperliquid’s DeFi Policy Center in Washington D.C. foster collaborative dialogue among regulators, infrastructure providers, and industry stakeholders. The platform recently secured $28 million in funding and appointed a prominent crypto lawyer as CEO, signaling industry commitment to regulatory compliance.

• Illicit Activities and Sanctions Evasion:
  Ongoing investigations reveal persistent illicit use of digital assets. Elliptic, a blockchain analytics firm, reported that in February 2025, at least five Russian-related crypto exchanges continued offering services to sanctioned entities after Garantex was shut down in March 2025. Moreover, ruble-pegged stablecoins like A7A5 are exploited as parallel on-chain systems for sanctions evasion, facilitating $39 billion in illicit flows—highlighting national security risks and the need for enhanced oversight.

Jurisdictional and RWA Oversight Challenges

A significant emerging challenge involves jurisdictional gaps in regulating Real-World Assets (RWA), especially those linked to assets in specific regions:

• Hong Kong Asset-backed RWAs:
  Recent reports by Caixin reveal that RWA linked to Hong Kong assets are often outside the regulatory scope of mainland Chinese authorities. This creates regulatory blind spots, potentially exploited for money laundering, tax evasion, or sanctions circumvention. As RWAs become more globalized and complex, cross-border oversight remains a critical issue for regulators aiming to establish comprehensive frameworks.

Current Status and Future Outlook

Today, the financial industry is rapidly transitioning from isolated pilot projects to integrated, operational markets powered by tokenization, CBDCs, and enhanced settlement networks. Central banks and regulators are deploying interoperable, secure, and resilient infrastructures to support tokenized assets, digital currencies, and continuous trading platforms. These innovations seek to increase liquidity, boost transparency, and broaden participation across regions and sectors.

However, the rise in illicit stablecoin activity and exploitation of on-chain systems for sanctions evasion underscore persistent risks. Addressing these challenges necessitates strengthened AML/KYC protocols, international cooperation, and interoperable surveillance tools—elements essential for maintaining trust and security in the evolving digital financial landscape.

Implications and Conclusions

As central banks and regulators accelerate their infrastructure upgrades and policy development, the vision of a digitally integrated, efficient, and secure global economy becomes increasingly tangible. The ongoing revision of tax policies—such as the Netherlands’ reconsideration of the crypto unrealized gains tax—and industry efforts to establish standardized tokenomics will shape a more stable and predictable environment for digital assets.

Simultaneously, the prevalence of illicit activities and jurisdictional gaps—exemplified by Hong Kong-linked RWAs—highlight the necessity for robust international coordination, comprehensive oversight frameworks, and advanced surveillance technologies. Achieving this balance will be vital for supporting innovation while mitigating risks.

In sum, the future of digital finance hinges on technological innovation coupled with vigilant, adaptive regulation. The coordinated efforts of central banks, regulators, and industry stakeholders are laying the groundwork for a more liquid, transparent, and inclusive financial system—one capable of navigating the complexities of a truly digital era.