Project Promissa – Digitizing Development Promises | DC Fintech Week 2025

Good afternoon once again for your remarks. Um I was planning to do bit of introduction on project froma but you've heard it already so many times that um I will directly introduce my colleagues Patrick and Dia from the World Bank that will share more about this project. So over to you and Well, good morning everyone and welcome to Washington DC um on behalf of the World Bank. Um really uh we're privileged to introduce this great project that uh and thank you Hong and Naj to to kind of give us a great opening. It is a very interesting project that it came from prototype into uh reality.

Um so I hope I'm blocking everybody here. Um it is called project premissa. So um we we came up a little bit of our own twist of it's digitizing development promises and together with my teammate uh Divia Gar we're co-lead on this project. We're part of the World Bank Treasury. So as you know the World Bank we're owned by 189 member countries almost like a cooperative in a sense.

My team sits in treasury department where we basically uh work with all the stakeholders to see if technology can really help make our um transaction more and more efficient. Okay, it works. Thank you. Um maybe I'll step back to talk everybody about how we are funded. So many MDB like ourselves are funded almost the same way.

Um we are actually mainly here a lot of our member countries are here stakeholders. We're actually thank you for all your contributions to us. We we we we have contribution from the members in cash or promisory note but we also are funding it through borrowings itself and I I know um Nur mentioned that we are also exploring tokenization on the digital world and we're very proud to be a partner with a lot of the market infrastructure to do almost three or four um digital bonds in the market. So that's covering on the borrowing side. On the contribution side, Permissa is the project that we're talking about.

All these money comes into doing all the capacity building grants, concessional lending, uh other lending products, and of course reinvest all these money uh just to make sure that we could recycle this into back into loan repayments and also other other uh administrative uh expenses and also um technical assistances. Thank you. It works. So maybe let me zoom in a little bit what promisor note is. Um and we'll have a little uh video uh that will probably explain it in better ways than I can ever do that.

But um we basically come from an IDA perspective. Of course the World Bank is owned by five different groups. IDA is the international development association which is uh lending the poorest the poor nations. Um we have donor countries that act as donors or subscribers to this uh agency and they come in cash or promisory notes. So uh you see below there's two bars IDA 20 and IDA 21.

So it means the 20th replenishment or the 21st replenishment. On the 20th punishment that was done a few years ago, we had almost 25 billion worth of contribution coming in as cash or promisory notes and almost 60% of that number is in the promisary note form and you it's very interesting. It's 59 almost 59 of the 189 countries that are coming in. looking forward to it 21 which is happening uh happened last year but again this annual meeting will give us more indication of how much of that split of 23.7 billion in cash or uh promis contribution how it's going to be kind of um allocated in a sense so what does it mean for us means that this promising note is not going to go away we need to have some way to digitize and basically tokenize this as much as we can now Looking at this overall map uh this is represents both our entities IBRD and IDA I IBRD uh is our main entity and IDA is our uh sister entity it covers all around the world and of course the gray out part doesn't mean that they didn't contribute they usually contribute on cash but this is the promise or no usage in our ex understanding there are actually certain European countries these notes that sits in the vault um and there are taken out every time that you process and and and stamp and and whatnot.

And there's one country that even put this note through um a highway to move between cities. So you have to understand how manual and and how paperbased it is. In some of our Caribbean nations um some of these nodes sits in a vault but they don't have their own central bank. They sits with the uh commercial bank but again exposed with the commercial risk. Um sometimes these needs to be transferred whenever there is insolvenies and whatnot.

And then we had a case that we had to find it just to make sure it didn't get lost. So it calls for um you know a need for really to do something about this. Um maybe then zooming in a little bit more. You know there's really these four corners of the promisary note management. Um let me maybe strip it down a little bit.

Uh the promisur which is the person that gives the promisory note usually is the country's ministry of finance. the promise, the World Bank or another, you know, set of IFI agencies, um, you know, MDBs. There's usually a paying agent called, um, you know, it could be the central bank or a commercial bank that acts in in in its, um, you know, capacity. And there's also a persona called the custodian. Typically, the custodian and the paying agency agents are usually the same set of actors, which is a central bank.

But we have a lot of cases where the country doesn't have a central bank. it actually splits and even in country that have central bank they like to split their work into two just to make sure the check and balance are in place. So the flow here is one um the the whenever a promisory note is created it's created by the promise give it to the promisey and it's deposited to whatever entity that acts as the commercial bank the custodian and the paying agent and this is a flow where uh things happen whenever it get in cash. So typically a note is in perpetuity. They don't have a set maturity date but the encachment can be any time but usually in a six month and annual basis.

So when you look at this flow it is really predominantly paperbased um slowing down a little bit of the operations and we looking at right now digitization in the private world how can we actually speed that up and it's really a call to um the G20 of us being more efficient as best we can. management of these u promising nodes is quite cumbersome and time consuming and when you see there's four players right four corners datas are actually kind of fragmented and we spend a lot of time talking each other just to make sure we're after the same same same amounts and when we were in cash and typically these amounts are coming into large sums in the millions um every time we settle and we use a traditional rail so maybe let me pause here and maybe show a video and this is a great work that is done by our PIS colleagues Um we actually worked through phase one with them uh since two well a year and a half ago. We just completed um this uh March in April with the report. And this is a video that um we we did together. So maybe we'll give you a minute.

Today's financial system is highly digital enabling trillions of dollars to be traded, cleared, [music] and settled daily. Building on this, there are exciting opportunities to further improve efficiency and streamline processes by moving from paper and manual methods to more automated solutions. The Bretonwoods Agreement established the World Bank in 1944 to promote economic growth and prevent instability. Over time, regionally [music] focused development banks emerged such as the Asian Development Bank. Since inception, these multilateral development banks have been funded in part by commitments from member countries recorded on paper known as premissary [music] notes.

A method mostly unchanged and unchallenged for decades. What is a promissary note? A promisary note is a written promise made by a member [music] country to pay a specific sum as part of its contributions to a multilateral development bank [music] by a future date. Today these promisary notes involve three distinct parties. The government or ministry of finance which issues the note, the multilateral development bank which receives it and a central bank which acts as the custodian.

This current paperbased setup requires physical handling, frequent messaging through various channels and repetitive reconciliations resulting in a time-consuming and cumbersome process. To address these issues, we introduce project premises, a digital initiative designed to reimagine the management of promissary notes. The project is a collaboration between the Swiss Center of the BIS innovation hub, the Swiss National Bank and the World Bank with the IMF participating as an observer. Project Promea [music] uses distributed ledger technology to tokenize promissary notes, automating manual processes and reducing time and costs. Tokenized permissary notes enable a shared single source of [music] truth for all participants and smart contracts with multi-party signatures ensuring speed, consistent messaging and efficient reconciliationfree management of the promissary notes throughout their life cycle.

This delivers significant benefits. There's no need for reconciliation and it provides realtime data availability. Multi-party signatures automate and accelerate life cycle management. Confidentiality [music] access is restricted to involved parties only and sovereignty. Full control [music] over promisary notes is ensured.

The project demonstrates technical feasibility and generated strong interest through engagement with central banks, ministries of finance and multilateral development banks. We tested Project Promeusa with partners worldwide, demonstrating how distributed ledger technology can support multilateral development banks in their mission to improve the world. With Project Promemesa, the future of promisary note management is tokenized, secure, and efficient. [music] check. All right.

Thank you, Patrick. And uh following that video, before I start, I'll just introduce myself. My name is Diva Gagar, a part of World Bank Treasury Financial Technology Team and co-leading projects. So far, we saw what the concept of promisory notes looks like through this prototype. And I'm here to speak about uh what the technology was that was used at the uh prototype level.

Underpinning project promesa was the canton protocol that that formed the base layer and through this visual representation you'll see at the center where we've got a synchronizer node uh that kind of loop through in all through the uh various web of networks that was there and surrounding the synchronizer node is a set of participant nodes which brings together the multilateral development banks such as the world bank and the Asian development bank and on the other side we've got the country participating networks. At the country level this brings together a further internal layer of distinction between the ministries of finance and the central banks. The synchronizer node is important because it captures the life cycle of events through the promisory nodes while maintaining data sovereignity. That is to say uh who can issue a note, who can encach it, who can approve it, who can archive it while maintaining the distinctive levels of approval as are followed in the current process. The the platform brought together a couple of features, but I'd like to highlight three of them.

The first one is slightly obvious where it creates a single source of truth where all the parties to the transaction look at the same ledger thereby looking at the same information which eliminates the need for reconciliation which previously took a couple of weeks of back and forth and now it's instant. The second being in terms of data sovereignity and this aspect is something which is important to the participating member countries to ensure that the rules which are currently followed uh distinctive between the ministries of finance and the central bank continue to be followed and that segregation of duties continues to be maintained. The third piece being the confidentiality and integrity piece where all the features that distributed ledger technology offers in terms of being immutable and creating an auditable record are uh benefited through this process. While this design was developed for the prototype, this lays the blueprint of what we will look to create as we think of moving towards a minimum viable product in the next stage. We touched upon this briefly in the video but uh to speak about the core members which participated in the phase one prototype.

Uh this was initially set up as a triparty between the Swiss center of the bank of international settlements innovation hub of course the world bank group and the Swiss national bank with the IMF acting as an observer. uh we did extend the prototype to a group of six countries globally to ensure that there was uh jurisdictional u considerations that were taken into account at the testing stage. So we did partner with uh with Austria, with Georgia, with Germany, with Saudi, with India to ensure that not just the individual processes that were followed at the regional level but also some of the legal considerations were taken into account. uh because as we think of creating a minimum viable product, scalability will be one of the key aspects that we will be uh looking at from the multilateral developmental bank's perspective. We partnered also with the Asian development bank so as to ensure that when we consider the scalability aspects, it's scalable not just with the member countries but also in the IFI community.

So what did we learn from this prototype? The first thing again an obvious one but the fact that distributed ledger technology works for this specific class of financial instruments promisory notes which are not the most commonly used form of instruments but the fact that this uh layer can be used for this particular class of instruments and the fact that it can uh eliminate the need for holding instruments in the paper form and uh reduce a lot of the manual burden around reconciliation. Uh we also learned here that the fact that code design matters because this prototype brought together different players right from the promisor the promisey the custodian of the uh of the promisory note workflow which ensured that real pain points that are experienced by each of these parties are addressed through the prototype. Currently the prototype is built to scale but as we think of the minimum viable product we are looking to enhance considerations around the uh framework and the legal aspects to ensure that a maximum number of uh participants could benefit from this platform. And that actually uh leads us to think about what the next steps would be in terms of the prototype.

Now that we've got the report for the phase one out and published, um we're thinking of in terms of the minimum viable product to enhance the framework around the governance which will also involve uh partnering once again with the bank for international settlements to co-lead an RFP which will include vendor selection to engage with uh key market intermediaries such as the ICSDs. uh in terms of the scalability, we are also looking to uh expand our network from the six testing participants plus Switzerland to ensure that some of the legal considerations that could be uh existing like Patrick mentioned in some of the Caribbean countries are taken into account. uh and perhaps further out into the horizon is once we've got this uh network up and running through the minimum viable product, it also lays the plumbing and the framework for any other bilateral financial agreements which exist between these three parties. Um so that was a brief I think introduction on what we've worked on in the prototype and what we aim to achieve in terms of the next steps. But before we share a couple of resources uh to take back, we we'd also like to share that beyond the scope of the prototype, the project has received uh recognition from the GBBC where this project was quoted amongst the 101 real world blockchain use cases and which was very recently the book was included to the library of congress.

Uh this was also cited in city bank's digital dollar publications as one of the use cases which brings together banks and public sector blockchain adoption. From the internal World Bank perspective, we're also happy to share that the project has received uh recognition from the World Bank group's president from in terms of its innovation awards uh which solidify the senior leadership support and institutional backing to this project as these uh initiatives are um hosted by the president himself, Mr. AJ Banga. So, we've got a few QR codes here uh in case anyone else would like to uh look in into a little bit of the details for the report. We've got QR codes for the full report, but in case you'd prefer a slightly more succinct version, we've got a two-page case study as well and the video which uh Patrick just played.

Uh but if you'd like the most quickest version, I think it's to connect with Patrick and me. I think we're going to have a coffee break right after this session. So, we are happy to connect with anyone who'd like to know a little more. Thank you. [applause]