In a bold step toward the future of finance, the Federal Reserve Bank of New York and the Bank for International Settlements (BIS) Innovation Hub are actively laying the groundwork for a fully tokenized financial ecosystem through their pioneering initiative, Project Pine.
The New York Innovation Center (NYIC), a division of the Federal Reserve Bank of New York, collaborated with the BIS Innovation Hub to develop a prototype toolkit of smart contracts. These programmable contracts are designed to support key central bank functions, including interest payments on reserves, open market operations, collateral management, and credit facility execution — within a tokenized framework. This effort aims to reimagine the traditional operations of central banks in a future where every financial asset and transaction is digitized.
Input from six additional central banks helped shape the project, with adaptability emerging as the top priority. That emphasis on flexibility led to a surprising realization: in a fully digital system, central banks could dramatically accelerate their crisis response capabilities. Traditionally, implementing emergency lending programs or swap arrangements can take weeks, even when the concept is ready. With Project Pine’s toolkit, central banks may be able to simultaneously announce and deploy such programs in real time, a critical advantage in a world where money moves faster and crises can evolve more rapidly.
At the heart of this leap is smart contract technology. The prototype, built using Ethereum-compatible Hyperledger Besu and Solidity, automates crucial functions while maintaining room for human oversight. Beyond the time savings, smart contracts offer unique efficiencies, such as combining collateral eligibility checks, haircut settings, and execution into a single streamlined process. Tokenization could also expand the types of collateral used, further justifying a shift toward programmable infrastructure.
Project Pine also envisions a central banking system that operates around the clock. In a 24/7 digital financial landscape, automated processes, guarded by robust frameworks, become essential, especially during off-hours.
Though still experimental and not indicative of formal Federal Reserve policy, Project Pine demonstrates how proactive planning can prepare central banks for long-term shifts. By anticipating the challenges and opportunities of a tokenized future, the Federal Reserve and BIS are not just reacting to innovation, they are actively shaping it.