The Bank for International Settlements (BIS) and the New York Federal Reserve’s Innovation Center have tested smart contract tools for managing monetary policy within tokenized systems, according to a report by BIS.
The experiment was conducted under Project Pine, utilizing the ERC-20 standard and an access control system.
In hypothetical scenarios, central banks adjusted collateral criteria, modified interest rates on reserves, and created new instruments within ten minutes.
According to BIS, smart contracts provided the “flexibility and speed” crucial for crisis response.
“The technology allows for instant adaptation of parameters in response to unforeseen events, such as a collapse in collateral value,” noted the report’s authors.
They stated this is the first step towards integrating blockchain into traditional central banking systems.
Asset tokenization could bring monetary policy into real-time operation, though it requires a technological overhaul, BIS warned.
The report’s authors indicated the experiment confirmed the potential for automating key central bank functions with smart contracts—from liquidity management to market stabilization.
Back in May, BIS calculated the turnover of cryptocurrencies in global trade flows. At its peak in 2021, Bitcoin, Ethereum, USDT, and USDC accounted for $2.8 trillion or 12%.