Fed and BIS Test Tokenized Monetary Policy via Smart Contracts

• Fed and BIS launch tokenized monetary policy pilot
• Smart contracts tested for automated currency controls
• Signals shift toward programmable central banking tools

Central Banks Enter the Smart Contract Era

The Federal Reserve Bank of New York, in collaboration with the Bank for International Settlements (BIS), has begun testing tokenized monetary policy using smart contracts. This groundbreaking pilot explores how programmable digital tools can be used to control and distribute central bank money in a more targeted, efficient manner.

The initiative is part of a broader effort to modernize central banking through blockchain technology, potentially revolutionizing how monetary policy is implemented in the future.

What Is Tokenized Monetary Policy?

Tokenized monetary policy refers to the use of digital tokens—representing central bank money—managed by smart contracts. These smart contracts can automate the application of policy tools, such as adjusting interest rates or liquidity levels, in real-time and with pinpoint precision.

By embedding monetary rules into code, central banks can test conditional logic such as automatically altering interest rates when inflation crosses a threshold or distributing funds based on predefined economic triggers.

This form of programmable policy management could enhance transparency, accountability, and speed in central banking operations.

Why It Matters

This experiment reflects a larger trend of digital transformation in central banking, with institutions exploring how blockchain and smart contracts can offer more responsive and data-driven monetary tools. The Fed and BIS are taking cautious but deliberate steps, signaling that the future of money might include not just central bank digital currencies (CBDCs), but also programmable monetary mechanisms.

If successful, tokenized monetary policy could make traditional methods of economic intervention faster, more equitable, and easier to audit. While still in the early stages, this pilot could lay the foundation for a new era of automated financial governance.

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