Central banks testing smart contract toolkit under BIS Project Pine

Published

2 months ago

May 16, 2025

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Central banks testing smart contract toolkit under BIS Project Pine

Central banks are experimenting with smart contracts to implement monetary policy in tokenized environments, signaling a growing interest in integrating blockchain technology into traditional finance (TradFi).

According to a joint research study by the Federal Reserve Bank of New York’s Innovation Center and the Bank for International Settlements (BIS) Innovation Hub Swiss Centre, smart contracts could offer central banks flexible, rapid-response tools in a tokenized financial system.

The study, dubbed Project Pine, tested a prototype “generic customizable monetary policy tokenized toolkit” for further research by central banks, according to a BIS report published May 15.

“The smart contract toolkit was fast and flexible,” the BIS wrote. “In hypothetical scenarios, the central bank was able to add and change tools instantly.”

The report emphasized that if tokenization becomes widely adopted for money and securities, smart contracts could play a central role in how monetary policy is executed.

This marks a “first step” in highlighting the potential benefits of tokenization for central banks, according to the BIS.

The framework “speed and consistency” was “validated” within a 10-minute hypothetical scenario where central banks quickly changed collateral criteria and exchanged liquid collateral for illiquid amid falling collateral values.

The smart-contract framework also allowed central banks to deploy a new facility offering reserves and changing the interest rates on the reserves in an “immediate” implementation.

Smart contracts, tokenization may help central banks

Smart contracts and tokenization technology may help central banks’ rapid response to “extraordinary events,” the BIS report said:

“This speed, coupled with the ability to adjust any of the parameters at any time, gives central banks flexibility in responding to unforeseen events and fast-moving crises.”

While promising, the report also acknowledged that central banks will likely face infrastructure challenges, as most existing systems are not designed for these advanced use cases.

Project Pine employed Ethereum’s ERC-20 token standard combined with another standard for “access control.”

Financial institutions have increasingly embraced tokenization in recent years.

At the Consensus 2025 conference, Joseph Spiro, product director at DTCC Digital Assets, called stablecoins the “perfect” financial instrument for real-time collateral management for financial transactions such as loans or derivatives.

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Crypto’s path to legitimacy runs through the CARF regulation

Published

8 mins ago

July 5, 2025

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Crypto’s path to legitimacy runs through the CARF regulation

The CARF regulation, which brings crypto under global tax reporting standards akin to traditional finance, marks a crucial turning point.

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Tokenized equity still in regulatory grey zone — Attorneys

Published

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Tokenized equity still in regulatory grey zone — Attorneys

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Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Published

6 hours ago

July 5, 2025

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Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Rachel Reeves has hinted that taxes are likely to be raised this autumn after a major U-turn on the government’s controversial welfare bill.

Sir Keir Starmer’s Universal Credit and Personal Independent Payment Bill passed through the House of Commons on Tuesday after multiple concessions and threats of a major rebellion.

MPs ended up voting for only one part of the plan: a cut to universal credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.

Initially aimed at saving £5.5bn, it now leaves the government with an estimated £5.5bn black hole – close to breaching Ms Reeves’s fiscal rules set out last year.

In an interview with The Guardian, the chancellor did not rule out tax rises later in the year, saying there were “costs” to watering down the welfare bill.

“I’m not going to [rule out tax rises], because it would be irresponsible for a chancellor to do that,” Ms Reeves told the outlet.

“We took the decisions last year to draw a line under unfunded commitments and economic mismanagement.

“So we’ll never have to do something like that again. But there are costs to what happened.”

Meanwhile, The Times reported that, ahead of the Commons vote on the welfare bill, Ms Reeves told cabinet ministers the decision to offer concessions would mean taxes would have to be raised.

The outlet reported that the chancellor said the tax rises would be smaller than those announced in the 2024 budget, but that she is expected to have to raise tens of billions more.

It comes after Ms Reeves said she was “totally” up to continuing as chancellor after appearing tearful at Prime Minister’s Questions.

Criticising Sir Keir for the U-turns on benefit reform during PMQs, Conservative leader Kemi Badenoch said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.

Sir Keir did not explicitly say that she would, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”

In her first comments after the incident, Ms Reeves said she was having a “tough day” before adding: “People saw I was upset, but that was yesterday.

“Today’s a new day and I’m just cracking on with the job.”

Sir Keir also told Sky News’ political editor Beth Rigby on Thursday that he “didn’t appreciate” that Ms Reeves was crying in the Commons.

“In PMQs, it is bang, bang, bang,” he said. “That’s what it was yesterday.

“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”