The Federal Reserve Bank of New York, in collaboration with the Bis Innovation Hub Swiss Center, concluded that tokenized assets, and not the digital currencies of the Central Bank (CBDC), could offer a future viable framework for monetary policy operations.
This observation follows from the recently published publication Project pine Report, which has tested the technical feasibility of the implementation of open market operations through intelligent contracts without introducing a retail or wholesale CBDC.
Explicitly distinguished itself in the development of CBDC, the report opens with a final warning:
“Project Pine is not intended to advance specific political results, and it does not represent any work by the federal reserve to establish, express or promote a digital currency of the central bank in the United States or abroad.”
Instead, the emphasis is placed on the integration of programmable platforms based on intelligent contracts with tokenized assets to support the basic function of the federal reserve, the implementation of monetary policy, in a future financial environment dominated by digital tokens.
Project Pine Prototype
The prototype developed under the Pine project consisted of a modular intelligent intelligent contract tool designed to simulate traditional central banking operations. This included the payment of interest on reservations, the execution of buyout agreements, the management of guarantee baskets and the purchase or sale of assets.
The contracts operated on a compatible ethereum (Besu) compatible platform, used ERC-20 token standards and were subjected to rigorous scenarios tests simulating real events such as liquidity shocks and asset sales.
To guarantee operational integrity and centralized control, all tokens and contracts were contained in an authorized programmable settlement layer.
One of the main components was an accumulation mechanism of programmable interest capable of calculating and regulating interest per second, thus supporting the operational preparation 24/7.
This granular timing, managed directly by the Central Bank, has enabled almost installation reactivity to market conditions without worrying about the network consensus, avoiding what the report calls the “oracle problem” in decentralized finance.
However, this obviously means centralized failure and authority points, a key characteristic of Tradfi and the antithesis of Defi.
DEFI protocols require external decentralized oracles to feed data in intelligent contracts, while the Pine Project prototype has made the central bank the only timer and oracle, considerably simplifying design and execution but centralize control.
Assets guaranteed on the channel
Collateral management is the cornerstone of the functionality of the prototype. Central banks could define multi-active collateral baskets with real-time prices, customizable haircuts and automatic margin calls triggered directly by smart contracts. The counterparts could exchange guarantees inside and outside during the end of an operation, and each active has been the subject of frequent evaluation updates.
This allowed continuous monitoring and rebalancing, representing a substantial evolution of traditional back-office procedures. Project Pine envisages intelligent contracts such as more than administrative tools but dynamic instruments for risk management and operational agility.
The architecture also laid the basis of a programmable settlement layer which could consolidate operations such as delivery against payment, the tokenized bond service and the supply of automated liquidity.
Each aspect, agents, tokens and contracts, has been viewed and tested in a simulated multi-agent environment, incorporating real-time feedback loops and stress tests based on a scenario. Although the simulation has not modeled specific savings or jurisdictions, the results were verified by counselors from seven central banks, including the ECB, the SNB and the Federal Reserve system.
Perhaps the most revealing, the project designed central banks as infrastructure anchors in the tokenized system. He noted that
“If the private financial sector adopts large -scale tokenization on wholesale markets, central banks may need to participate in new financial market infrastructure and interact with digital tokens to continue to effectively implement monetary policy”.
In doing so, the report highlights a divergence from the account of the CBDC focused on retail outside the United States. Rather than seeking to digitize species, the emphasis is placed on improving liquidity management, collateral operations and real -time analyzes in token interbank systems.
Centralized control
According to Project Pine, governance and operational risk remain significant priorities. The report recognizes potential dangers, intelligent contract errors, oracle dysfunctions and the risk of transparency linked to the use of net installations.
It offers human surveillance in the loop, modern contracts and access controls based on roles as attenuation strategies.
However, even these controls imply a future in which central banks have privileged access to sensitive data and oversee a hybrid architecture that mixes programmability with centralized authority.
Project Pine ultimately reappears the digital future of the Central Bank. Rather than promoting CBDC, the search for the federal reserve highlights token financial infrastructure and programmable intelligent contracts as more immediate pathways.
The market seems to agree as the BlackRock Buidl Fund ends with $ 3 billion in US Treasury Bonnes and Vaneck joins the race for tokenization. Institutional tokenization now includes $ 22 billion in real assets and $ 231 billion in stablecoins.
Central banks, depending on the report, can remain central, not by issuing new forms of digital money, but in regenery how they interact with tokenized assets in a modernized financial system.
