Central bank project shows monetary policy still viable in 'tokenized' system
The report said a prototype system designed to conduct monetary policy in a financial system reliant on new, more automated systems "successfully responded and instantaneously carried out the intended operation under the varying market conditions, consistent with the central bank's desired liquidity environment."
The prototype created for the study showed there's even the possibility of central bank monetary policy working even better under a decentralized financial system. The project came out of work done by the New York Fed's Innovation Center and the Bank for International Settlements' Innovation Hub, as part of the Project Pine effort.
"Central banks could use smart contracts to easily and quickly create new facilities or adjust existing ones to optimize the implementation of monetary policy in a tokenized environment," which means future operations could be "nimbler in uncertain conditions and potentially reduce frictions between the time of announcements and offerings," the report said.
Tokenization refers to assets with digital tokens on a blockchain.
The report noted that the research was conducted in conjunction with inputs from a number of central banks and its setup was generically oriented rather than tailored to the operations and goals of a particular central bank. The project was undertaken as part of preparatory efforts to make sure central banks will be ready for any future changes in financial markets.
The prototype system covered by the report is designed to perform most of the key technical functions that monetary policy does now to achieve central bank policy goals.
While there is no current threat to how central banks now intervene in markets to set interest rates and manage market liquidity, rising decentralizations and new technologies, some of which are in use already, could change that at some point.
"If the private financial sector adopts tokenization on a broad scale in wholesale markets, central banks may need to participate in novel financial market infrastructures and interact with digital tokens to continue effectively implementing monetary policy," the report said.
Decentralized financial systems could also create "emerging challenges" for money created by the central bank, the report said. In terms of central bank operational issues "the additional complexity of central bank operations has increased incentives to use technology to automate tasks and processes." At the same time, "central banks still face a challenge in integrating automated processes with those that require human judgment."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
4 hours ago
- CNA
Dollar struggles as Fed rate-cut bets build, bitcoin soars to record
TOKYO :The U.S. dollar languished at multi-week lows versus major peers on Thursday as traders ramped up bets for the Federal Reserve to resume reducing interest rates next month. The greenback fared worst against the yen after U.S. Treasury Secretary Scott Bessent suggested the Bank of Japan needs to hike rates again soon, while the Fed cuts aggressively. Rising expectations for monetary easing combined with increasing institutional cryptocurrency investment powered bitcoin to a fresh record peak. Australia's dollar gained after data showed the labour market to be surprisingly resilient. That was a different story than the U.S., where Fed rhetoric has turned broadly more dovish on signs of a cooling labour market, while President Donald Trump's tariffs are yet to add to price pressures in a significant way. Traders see a Fed rate cut on September 17 as a near certainty, according to LSEG data, and even lay around 7 per cent odds on a super-sized half-point reduction. "For the markets, it's not even a matter of if the Fed cuts interest rates in September, it's a question of how much," said Kyle Rodda, an analyst at "Signs of a downturn in the labour market have pushed futures to bake in a series of rate cuts before the end of the year." The Fed also continues to be under intense political pressure to ease. Trump has repeatedly criticised Fed Chair Jerome Powell for not cutting rates sooner, even threatening to oust him before Powell's term expires in May. Treasury Secretary Scott Bessent on Wednesday called for a "series of rate cuts," and said the Fed could kick off the policy easing with a half-point cut. Bessent also said the BOJ had gotten "behind the curve" by delaying rate hikes. "Bessent's comments are having a strong impact on USDJPY," said Norihiro Yamaguchi, an economist at Oxford Economics. At the same time, "gains in the yen are being accelerated by low liquidity in the market as fewer market participants are around this week" due to the Obon holiday, he said. The U.S. dollar dropped as much as 0.7 per cent to 146.35 yen on Thursday, its weakest since July 24. Sterling edged up enough to reach its highest since July 24 at $1.3590. The euro hovered at $1.1703, just below Wednesday's peak of $1.1730, a level last seen on July 28. Meanwhile, a weaker U.S. dollar, the spectre of political interference in central bank policy, and the increase in investor risk appetite amid Fed easing prospects all converged to buoy bitcoin to its first record peak since July 14. The world's leading cryptocurrency pushed as high as $124,480.82 in the latest session, before last changing hands at around $123,000. Bitcoin was already underpinned by increased institutional money flows this year in the wake of a spate of regulatory changes spearheaded by Trump, who has billed himself the "cryptocurrency president." In the latest move, an executive order last week paved the way to allow crypto assets in 401(k) retirement accounts. "Corporate treasuries like MicroStrategy and Block Inc. continue to buy bitcoin," said IG analyst Tony Sycamore. "Technically, a sustained break above $125,000 could propel bitcoin to $150,000." The Australian dollar advanced as much as 0.4 per cent to the highest since July 28 at $0.65685, although it later trimmed those gains to stand at $0.6552. Australian employment rebounded in July as firms took on more full-time workers, pulling the jobless rate down from a 3-1/2-year high.
CNA
7 hours ago
- CNA
Trump orders easing of commercial spaceflight rules, in boon to Musk's SpaceX
WASHINGTON :U.S. President Donald Trump signed an executive order on Wednesday to streamline federal regulation governing commercial rocket launches, a move that could benefit Elon Musk's SpaceX and other private space ventures. Trump's order, among other things, directs the U.S. transportation secretary to eliminate or expedite environmental reviews for launch licenses administered by the Federal Aviation Administration, the White House said in a statement. The declaration also calls on the secretary to do away with "outdated, redundant or overly restrictive rules for launch and reentry vehicles." "Inefficient permitting processes discourage investment and innovation, limiting the ability of U.S. companies to lead in global space markets," the executive order states. While Musk and Trump had a high-profile falling out months ago, the billionaire entrepreneur's SpaceX rocket and satellite venture potentially stands to be the single biggest immediate beneficiary of Trump's order on Wednesday. SpaceX, though not mentioned by name in Trump's order, easily leads all U.S. space industry entities, including NASA, in the sheer number of launches it routinely conducts for its own satellite network, the U.S. space agency, the Pentagon, and other enterprises. Jeff Bezos' private rocket company Blue Origin and its space tourism business could also gain from a more relaxed regulatory regime. Musk has repeatedly complained that environmental impact studies, post-flight mishap investigations and licensing reviews required by the FAA have needlessly slowed testing of SpaceX's Starship rocket, under development at the company's South Texas launch facility. Starship is the centerpiece of Musk's long-term SpaceX business model, as well as a core component of NASA's ambitions for returning astronauts to the moon's surface, establishing a permanent human lunar presence and ultimately sending crewed missions to Mars. Musk has viewed FAA oversight as a hindrance to his company's engineering culture, considered more risk-tolerant than many of the aerospace industry's more established players. SpaceX's flight-test strategy is known for pushing spacecraft prototypes to the point of failure, then fine-tuning improvements through frequent repetition. This has appeared to run afoul at times with the FAA's mission of safeguarding the public and the environment as it exercises its regulatory jurisdiction over commercial spaceflight. Earlier this year, the FAA grounded Starship test flights for nearly two months after back-to-back post-launch explosions rained debris over Caribbean islands and forced dozens of airliners to change course. The FAA ended up expanding the aircraft hazard zone along Starship's launch trajectories before licensing future flights.
CNA
8 hours ago
- CNA
Paramount's new owners to increase film production, hang on to cable networks
LOS ANGELES :Paramount Global unveiled plans on Wednesday to retain and develop its stalwart entertainment brands Nickelodeon, MTV, and BET, while sharply increasing feature film production following its $8.4 billion merger with Skydance Media. "We're thinking about ... the cable networks, not as declining linear assets that we need to spin off or deal with somehow," said President Jeff Shell. "We're thinking of those brands that we have to redefine." Shell joined Chairman and CEO David Ellison and the rest of the executive team at a media gathering on Wednesday on the Paramount Pictures lot, where they discussed strategy for their film, television, and streaming businesses - as well as emerging technologies such as artificial intelligence. The press event was held a week after Paramount completed its merger with Skydance Media, installing new leadership at the media company. Television Media Chair George Cheeks acknowledged the decline of cable television - "there's no question it's a super challenging business" - but added that the company's cable networks have created iconic franchises that may well thrive in the world of streaming video. Shell singled out BET, a network focused on Black culture that Paramount previously explored selling, as an important building block of the company's streaming strategy. Paramount's plans to develop its legacy cable networks come at a time when other media companies are shedding fading cable networks. Warner Bros Discovery and Comcast have announced plans to separate their cable businesses from their studios and streaming operations. Josh Greenstein, co-chair of Paramount Pictures, said the studio plans to raise annual output, from eight this year to 15 movies "very quickly," with the ultimate goal of releasing 20 films a year. The coming slate will include new installments of familiar franchises, such as "Star Trek" or "Transformers," as well as original movies, like the newly acquired James Mangold film project, "High Side," starring Timothée Chalamet. The studio also will seek out family fare, in the vein of "A Night at the Museum" or "The Goonies." "We love these movies. We all grew up on these movies, and we don't feel like many people are making them," said Dana Goldberg, co-chair of Paramount Pictures. Ellison said his goal is to transform Paramount into a haven for the most talented filmmakers and sees emerging technologies like artificial intelligence providing a tool to enhance storytelling. "I also think we have to acknowledge that this is a technology that is evolving, I think, faster than everyone in Hollywood really thinks it is," said Ellison, who is the son of Oracle co-founder Larry Ellison. "When you start putting that in a filmmaker's hands, I think you're seeing another moment that'll be as transformative as when John Lasseter and Steve Jobs built Pixar."
