Federal Reserve Bank of New York and Bank for International Settlements publish Project Pine study on smart contract tools for tokenized monetary policy operations

The Federal Reserve Bank of New York and the Bank for International Settlements (BIS) published a joint research study assessing whether central banks could continue to implement monetary policy operations in a hypothetical future where wholesale payments and securities settlement are widely tokenized. Project Pine developed and tested a prototype “tokenized toolkit” that uses programmable smart contracts to deploy policy implementation tools under different central bank frameworks. Designed to be currency- and jurisdiction-neutral and technically modifiable, the prototype was calibrated to support standard and emergency market operations, including paying interest on reserves, conducting open market operations, and managing collateral. It was created with input from central bank financial markets advisors from multiple jurisdictions and evaluated in ten hypothetical scenarios spanning normal conditions and stress events using historical data inputs from past tightening and easing cycles, quantitative easing and tightening cycles, and periods of strained liquidity; the prototype executed the intended operation in each scenario consistent with the desired liquidity environment. The study flags interoperability and data standardization as areas for further research and notes that the work is experimental and does not reflect policies or directives of the Federal Reserve Bank of New York or the Federal Reserve System.