Central banks are experiencing with intelligent contracts to implement monetary policy in tokenized environments, indicating a growing interest in integrating blockchain technology into traditional finances (tradfi).
According to a joint research study conducted by the Innovation Center of the Federal Reserve of New York and the Swiss Innovation Swiss Bank for International Chastlements (BIS) HUB, intelligent contracts could offer central banks flexible and rapid response tools in a tokenized financial system.
The study, called Pine Project, tested a prototype “Kit of Tokenized Tool of Customizable Generic Monetary Policy” for a greater investigation of the central banks, according to a BIS report published on May 15.
“The smart contract tool kit was fast and flexible,” the bis wrote. “In hypothetical scenarios, the Central Bank could add and change the tools instantly.”
The report emphasized that if tokenization is widely adopted for money and values, intelligent contracts could play a central role in how monetary policy is executed.
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This marks a “first step” to highlight the potential benefits of tokenization for central banks, according to the bis.
The “speed and consistency” frame was “validated” within a 10 -minute hypothetical scenario where the central banks quickly changed the collateral criteria and exchanged the liquid guarantee for the collateral values of the fall of the ilíchids.
The intelligent contract frame also allowed central banks to implement a new installation that offers reservations and change interest rates in reserves in an “immediate” implementation.
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Smart contracts, tokenization can help central banks
Smart contracts and tokenization technology can help the rapid response of central banks to “extraordinary events”, according to the BIS report:
“This speed, together with the ability to adjust any of the parameters at any time, gives flexibility to central banks in response to unforeseen events and rapid movement crises.”
While it is promising, the report also acknowledged that central banks will probably face infrastructure challenges, since most existing systems are not designed for these cases of advanced use.
Project Pine used Ethereum Token ERC-20 standard combined with another standard for “access control.”
Financial institutions have adopted more and more tokenization in recent years.
At the Consensus 2025 Conference, Joseph Spiro, Director of Products of DTCC Digital Assets, called the “perfect” financial instrument for collateral management in real time for financial transactions such as loans or derivatives.
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