Project Pine: Central Bank Open Market Operations with Smart Contracts (BIS)
The Federal Reserve Bank of New York and the Bank for International Settlements (BIS) published a joint research study that explored if and how central banks could continue to implement monetary policy operations in hypothetical tokenized wholesale financial markets. Project Pine found that central banks could customize and deploy policy implementation tools using programmable smart contracts in a potential future state where commercial banks and other private sector financial institutions have widely adopted tokenization for wholesale payments and securities settlement. The project generated the prototype of a generic monetary policy implementation tokenized toolkit for potential further research and development by central banks across jurisdictions and currencies. The prototype was designed to be technically modifiable for different central banks’ monetary policy frameworks and calibrated to conduct standard or emergency market operations. [Read more at the BIS]
Project Pine is not intended to advance any specific policy outcomes, nor does it represent any work by the Federal Reserve to establish, issue or promote any central bank digital currency within the United States or abroad.
Towards Verifiability of Total Value Locked in Decentralized Finance (BIS)
The Bank for International Settlements (BIS) published a paper that examines how total value locked (TVL) in decentralized finance (DeFi) is computed, identifies key challenges that hinder its verifiability, and proposes solutions to improve its computation. Its findings indicate limits to verifiability and transparency, and introduces a “verifiable Total Value Locked” (vTVL) metric measuring the TVL that can be verified relying solely on on-chain data and standard balance queries. A case study on 400 protocols shows that its estimations align with published figures for 46.5% of protocols, pointing to the potential for further TVL standardization. [Read more at the BIS]
The Association for Financial Markets in Europe (AFME) published a paper outlining two critical steps needed to scale distributed ledger technology (DLT) in capital markets in the European Union. First is the urgent need for a settlement solution for tokenized assets using central bank money. Secondly, AFME wants to see tokenized securities being considered eligible as collateral when banks borrow money from their central bank. [Read more at the AFME]
Upcoming Speaking Engagements:
The CB+DC Conference (Nassau, Bahamas, September 9-11) is a premier gathering centered on CBDCs, tokenized assets, and stablecoins. It provides a forum for central bankers, commercial bankers, technology innovators, policymakers, and academics to explore the latest advancements in digital currency, engage with experts and peers, and discuss the future of digital currency. [Register here but before you do, email me at john@kiffmeister.com for a 15% discount]
And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.