Central banks are experimenting with smart contracts to implement monetary policy in tokenized environments, signaling a growing interest in integrating blockchain technology into traditional finance (TradFi).
According to a joint research study by the Federal Reserve Bank of New York’s Innovation Center and the Bank for International Settlements (BIS) Innovation Hub Swiss Centre, smart contracts could offer central banks flexible, rapid-response tools in a tokenized financial system.
The study, dubbed Project Pine, tested a prototype “generic customizable monetary policy tokenized toolkit” for further research by central banks, according to a BIS report published May 15.
“The smart contract toolkit was fast and flexible,” the BIS wrote. “In hypothetical scenarios, the central bank was able to add and change tools instantly.”
The report emphasized that if tokenization becomes widely adopted for money and securities, smart contracts could play a central role in how monetary policy is executed.
Project Pine system