The New York Fed and the Bank for International Settlements (BIS) are exploring smart contracts and digital tokens to modernise monetary policy — including key actions like adjusting interest rates or injecting money into banks — that influence inflation, employment, and economic growth.
This collaboration could potentially transform how central banks manage the global economy and marks a major innovation in finance.
The experiment, known as Project Pine, aims to test whether these advanced digital tools could help central banks operate more efficiently and responsively, particularly since they currently rely on a complex network of intermediaries, banking systems, and legal processes — systems that can introduce delays and inefficiencies.
To this end, Project Pine is testing whether smart contracts — automated computer programs that execute actions when specific conditions are met — could be used to carry out monetary policy operations directly on a blockchain.
Building on a secure digital platform, the pilot project is exploring whether tokenised money — central bank funds converted into digital tokens — could be transferred and controlled instantly via blockchain technology.
For example, if a central bank needed to inject liquidity into the banking system when inflation drops below a certain level, a smart contract could be programmed to say: “If the inflation rate falls below 3%, release $500m worth of digital tokens to commercial banks.”
Once that condition is met, the code executes automatically — no middlemen, no delays.
It’s a bit like a vending machine: insert the right coin, press the button, and out comes your snack. Smart contracts work the same way — condition + code = automatic result.
Enter smart contracts and tokenised money
In a report released this month, the New York Fed and BIS concluded that these technologies could:
If adopted more widely, this kind of system could:
By using programmable money and automated execution, central banks could better respond to economic shifts — such as inflation or financial crises — in real time. This could translate into greater stability and predictability for banks, businesses, and everyday people.
However, the approach also raises important questions about global-system interoperability, governance, and the balance of power in a digitally interconnected financial future.
A glimpse into the future
While still in the experimental stage, Project Pine signals growing interest among major financial institutions in digital transformation. Alongside other efforts like Central Bank Digital Currencies (CBDCs) and cross-border payment reforms, these initiatives are laying the groundwork for a more connected, transparent, and responsive global economy.
For now, these are just prototypes. But in the years ahead, it’s possible that the money powering the global economy — and the systems that manage it — will become far more digital, automated, and efficient.
Where Project Agora fits in
Already, Project Pine falls under a broader initiative known as Project Agora — a multi-phase BIS innovation programme launched in April 2024. Agora explores how tokenised central bank money might function in a future where finance is increasingly digital, programmable, and globally interconnected.
Project Agora is a collaborative effort involving the BIS Innovation Hub, the Federal Reserve Bank of New York, and six other central banks — those of France, Japan, South Korea, Mexico, Switzerland, and the United Kingdom.
Its aim is to explore how tokenised central bank money and commercial bank deposits, operating on a shared programmable ledger, could improve wholesale cross-border payments. By integrating smart contracts and tokenisation, the initiative seeks to boost the speed, transparency, and efficiency of international payments while reducing costs and operational risks.
The project builds on the BIS’s unified ledger concept and involves active partnerships with private financial institutions to test the technology within realistic regulatory, legal, and operational parameters.
These initiatives reflect a growing consensus among central banks: embracing emerging technologies is key to keeping monetary policy effective, resilient, and adaptable in an increasingly digital and decentralised financial landscape.