The Federal Reserve Bank of New York, in collaboration with the BIS Innovation Hub Swiss Center, concluded that Tokenized Assets, Not Central Bank Digital Currencies (CBDCs), could offer a viable future framework for monetary policy activities.
This finding stems from the recently published Project Pine reportwho tested the technical feasibility to implement open market activities through smart contracts without introducing a retail or wholesale CBDC.
The report is explicitly distant from CBDC development, the report opens with a definitive disclaimer:
“Project Pine is not intended to promote specific policy results, nor represents the work of the Federal Reserve to set up, publish or promote digital currency of the Central Bank in the United States or abroad.”
Instead, the emphasis is on integrating smart contract -based programmable platforms with tokenized assets to support the core function of the Federal Reserve, the implementation of monetary policy, in a future financial environment that is dominated by digital tokens.
Project Pine Prototype
The prototype developed under Project Pine consisted of a modular smart contract tool kit that was designed to simulate traditional central banking activities. This included paying interest on reserves, performing purchasing agreements, managing colland baskets and buying or selling assets.
The contracts that were operated on a permitted Ethereum-compatible platform (BESU), used ERC-20-20-token standards and were subjected to rigorous scenario tests that simulate real-world events such as liquidity shocks and sale of assets.
To guarantee operational integrity and centralized control, all tokens and contracts were included in permission, programmable settlement layer.
One of the core components was a programmable interest -built -up mechanism that was able to calculate and establish interest per second, which supported 24/7 operational preparation.
This detailed time valuation, directly managed by the Central Bank, made a near-instant reaction capacity on market conditions possible without dependence on network consensus, so that the report is called the “Oracle problem” in decentralized financing.
However, this naturally means centralized failure points and authority, an important feature of Tradfi and the antithesis of Defi.
Defi protocols require external decentralized oracles to enter data in smart contracts, while the Pine Prototype project made the central bank the only timekeeper and oracle, which greatly simplifies design and implementation, but centralization control.
Collateral assets on chain
Collateral management is a cornerstone of the functionality of the prototype. Central benches can define multi-asset colland baskets with real-time prices, adjustable hairstyles and automatic margin calls that are directly activated by smart contracts. Against and out, counterparties were able to trade in and out during the term of an operation, and each was active to frequent valuation updates.
This led to continuous monitoring and again in balance, which represents a substantial evolution from traditional back-office procedures. Project Pine sees smart contracts as more than administrative tools but dynamic instruments for risk management and operational agility.
The architecture also laid the foundation for a programmable settlement layer that could consolidate operations such as delivery versus payments, tokenized bond service and automated liquidity provision.
Each aspect, agents, tokens and contracts, was visualized and tested in a simulated multi-agent environment, with real-time feedback klussen and scenario-based stress tests. Although the simulation did not model specific economies or jurisdictions, the findings were examined by advisers from seven central banks, including the ECB, BOE, SNB and the Federal Reserve System.
Perhaps the most significant, the Central Banks project as an infrastructure anchors within the Tokenized system framed. That noticed
“If the private financial sector adopts tokenization on a wide scale in wholesale markets, central banks may have to participate in new financial market infrastructures and communicate with digital tokens to continue to implement monetary policy effectively”.
In addition, the report emphasizes a divergence of the retail-oriented CBDC story that is growing outside the US. Instead of trying to digitize cash, the emphasis shifts to improving liquidity management, collateral activities and real-time analyzes within Tokenized Interbancy systems.
Centralized check
According to Project Pine, governance and operational risk remain top priorities. The report recognizes potential hazards, smart contract errors, oracle disruptions and transparency risks linked to the use of backstop facilities.
It suggests human-in-the-loop, upgrade contracts and roles-based access controls as mitigation strategies.
But even these operating elements take on a future in which central banks have privileged access to sensitive data and supervise a hybrid architecture that combines programmability with centralized authority.
Project Pine ultimately reformulates the digital future of central banking. Instead of promoting CBDCs, the research of the Federal Reserve tokenized financial infrastructures and programmable smart contracts emphasize as more immediately usable paths for innovation.
The market seems to agree, because the Buidl Fund of BlackRock concludes at $ 3 billion in tokenized American treasuries and Vaneck joins the Tokenization race. Institutional tokenization now includes $ 22 billion From real assets and $ 231 billion in stablecoins.
Central banks, as the report implies, can remain central, not by publishing new forms of digital currency, but by re -engineering how they deal with Tokenized assets in a modernized financial system.
