Central banks experiment with intelligent contracts to be able to implement monetary policy in tokenized environments and signal a growing interest in the mixing of blockchain technology in traditional funds (tradfi).
According to a joint research study by the Federal Reserve Bank of New York and the Innovation Hub Swiss Center of Bank for International Settlements (up), intelligent contracts could offer central banks flexible, fast tools for response in a toxic economic system.
The study, which Project Pine called, tested a prototype “Generic customizable monetary policy -Tooked toolkit” for further research by central banks, based on a report published on May 15.
“The Smart Contract Toolkit was quick and versatile,” he wrote. “In hypothetical scenarios, the Central Bank Tools was in a position to add and alter immediately.”
The report emphasized that if the tokenization for money and securities is widespread, intelligent contracts could play a central role within the execution of monetary policy.
Project pine system overview. Source: bis
This is a “first step” to spotlight the potential benefits of tokenization for central banks.
The framework of “speed and consistency” was “validated” inside a 10-minute hypothetical scenario, wherein the central banks quickly modified the collateral criteria and have replaced fluid collateral for illiquid in the midst of falling collateral values.
The Smart Contract framework also enabled the central banks to make use of a brand new facility with reserves and to alter the rates of interest for the reserves in an “immediate” implementation.
Smart contracts, tokenization can assist central banks
Smart contracts and tokenization technology can assist to react to the short response of the central banks to “extraordinary events”, the as much as report says:
“This speed, combined with the power to adapt the parameters at any time, gives central banks flexibility in response to unexpected events and rapidly moving crises.”
The report was promised promising that the central banks will probably be with infrastructure challenges, since most of existing systems aren’t designed for these advanced use cases.
Project Pine used ETHEREUM ERC-20-token standard together with one other standard for “access control”.
Financial institutions have increasingly accepted tokenization in recent times.
At the 2025 consensus conference, Joseph Spiro, product director at DTCC Digital Assets, described stable coins as a “perfect” financial instrument for real-time security management for financial transactions akin to loans or derivatives.
