The Bank for International Settlements (BIS) Innovation Hub, together with the Federal Reserve Bank of New York’s New York Innovation Center, published Project Pine, a research study assessing whether and how central banks could implement monetary policy operations in a future where wholesale payments and securities are widely tokenised. The project built and tested a prototype “toolkit” using smart contracts and found that central banks could carry out core functions such as paying interest on reserves and running open market operations in a tokenised environment. The prototype was designed to support interest-bearing reserves (including varying and tiered rates), facilities that temporarily exchange reserves and collateral in both directions, asset swaps, and outright asset purchases and sales, with collateral eligibility, haircuts and valuation embedded into the smart contract set-up. Testing used hypothetical scenarios calibrated to past market episodes, including tightening and easing cycles, quantitative easing and tightening, and periods of strained liquidity, and showed facilities and parameters could be created or adjusted immediately, including automated collateral calls and frequent collateral revaluation. The report also flags considerations for central banks operating in tokenised systems, including the need for privileged access to data and higher privacy and security standards, alongside operational risks such as errors in automated workflows, vulnerabilities in external data feeds used for functions like pricing, and potential confidentiality issues around backstop facility use. Project Pine positions the work as an early-stage technical experiment and a starting point for central banks to assess opportunities, risks and requirements in their own jurisdictions, with further research areas noted including adding multiple currencies to the toolkit and exploring implications for market analysis and interoperability. The report also notes that the New York Fed’s participation was limited to research and experimentation and that the project is not intended to advance specific policy outcomes or represent work to establish, issue or promote a central bank digital currency.
Bank for International Settlements - Innovation Hub 2025-05-14
Bank for International Settlements Innovation Hub publishes Project Pine findings on using smart contracts for tokenised open market operations
The Bank for International Settlements Innovation Hub and the Federal Reserve Bank of New York’s New York Innovation Center published Project Pine, a research study and prototype toolkit showing that central banks could conduct core monetary policy operations in a tokenised wholesale payments and securities environment using smart contracts. Testing across hypothetical stress and policy scenarios indicated that interest on reserves, collateralised facilities, asset swaps and outright purchases and sales could be configured and adjusted in real time, while highlighting data access, privacy, security and operational risk considerations. The project is framed as an early-stage technical experiment, not work to establish or promote a central bank digital currency.