Latest news with #ProjectPine
Crypto Insight
28-05-2025
- Business
- Crypto Insight
How central banks are testing blockchain-based monetary policy
Tokenized monetary policy means that the liabilities and assets a central bank uses to steer short-term interest rates exist as programmable tokens on a distributed-ledger platform. In such a token arrangement, what the BIS describes as an ecosystem where money and securities share a common ledger, monetary functions are executed by smart contracts, replacing the traditional batch file processes used in overnight real-time gross settlement (RTGS) systems. In practice, each policy tool is expressed as code: Project Pine demonstrated all three, using ERC-20 tokens for reserves and securities on a permissioned Ethereum-compatible chain. But how is tokenized monetary policy different from traditional monetary policy? Traditional policy operations rely on central bank systems such as Fedwire or the Bank of England's RTGS. These systems close overnight, settle in discrete batches and require multiple human sign-offs. A tokenized system settles atomically in seconds, keeps an immutable audit trail and lets policy adjustments propagate without waiting for dealers to book trades. The BIS paper on tokenisation notes that combining assets and settlement on a single ledger can shrink operational risk and latency. Did you know? A repo is a short-term secured loan in which one party sells securities and agrees to repurchase them later at a higher price. In contrast, a reverse repo is the same transaction viewed from the counterparty's perspective (buying the securities and later reselling them).
Finextra
15-05-2025
- Business
- Finextra
BIS and NY Fed test policy implications of future tokenised market
The Federal Reserve Bank of New York and the Bank for International Settlements (BIS) have published a joint research study that explored how central banks could continue to implement monetary policy operations in tokenised wholesale financial markets. 0 Dubbed Project Pine, the study found that central banks could deploy policy implementation tools using programmable smart contracts in a potential future state where commercial banks have widely adopted tokenisation for wholesale payments and securities settlement. The project generated the prototype of a generic monetary policy implementation tokenised toolkit for potential further research and development by central banks across jurisdictions and currencies. The BIS and the Fed say the prototype can fulfil a common set of central bank implementation requirements, including paying interest on reserves, open market operations, and collateral management. The toolkit was tested against ten hypothetical scenarios that applied historical data inputs on past market events, such as interest rate tightening and easing cycles, quantitative easing and tightening cycles, and periods of strained market liquidity or broader market disruptions. "The prototype successfully responded and instantaneously carried out the intended operation under the varying market conditions," states the BIS. "Project Pine's findings highlighted areas for further research and analysis related to interoperability and data standardisation."
Yahoo
14-05-2025
- Business
- Yahoo
Central bank project shows monetary policy still viable in 'tokenized' system
By Michael S. Derby and Marc Jones NEW YORK (Reuters) -Central banks should still be able to conduct monetary policy effectively and perhaps be even nimbler in a more decentralized financial system, according to the findings of a joint report released on Wednesday by the New York Federal Reserve and the Bank for International Settlements. 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." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNA
14-05-2025
- Business
- CNA
Central bank project shows monetary policy still viable in 'tokenized' system
NEW YORK :Central banks should still be able to conduct monetary policy effectively and perhaps be even nimbler in a more decentralized financial system, according to the findings of a joint report released on Wednesday by the New York Federal Reserve and the Bank for International Settlements. 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."
Reuters
14-05-2025
- Business
- Reuters
Central bank project shows monetary policy still viable in 'tokenized' system
NEW YORK, May 14 (Reuters) - Central banks should still be able to conduct monetary policy effectively and perhaps be even nimbler in a more decentralized financial system, according to the findings of a joint report released on Wednesday by the New York Federal Reserve and the Bank for International Settlements. 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."
