The Bank for International Settlements, Swiss National Bank, and two other central banks are exploring cross-border CDBC trading and settlement using DeFi protocols.
The Bank for International Settlements (BIS) in Basel is often referred to as the central bank for central banks. BIS is joined by the Swiss National Bank (SNB), Banque de France (BdF), and the Monetary Authority of Singapore (MAS) to explore using decentralized finance (DeFi) protocols to automate foreign exchange markets and settlements in an effort dubbed «Project Mariana», the BIS announced Wednesday.
Project Mariana is being launched through the BIS innovation hub around central bank digital currencies (CBDCs) and Defi protocols as part of its 2022 work program. It will explore the cross-border exchange of wholesale CDBCs and is the first to involve three hub centers. Involved in the project are the Eurosystem, Singapore, and the BIS Innovation Hub Centres together with the BdF, the MAS, and the SNB, with the goal of delivering a proof-of-concept by the middle of next year.
Exploring Potential
At its core, the project explores automated market makers (AMM) for the cross-border exchange of hypothetical Swiss francs, euro, and Singapore dollar wholesale CBDCs. It will seek to examine the potential between financial institutions to settle foreign exchange trades in financial markets.
DeFi built on public blockchains uses smart contract protocols to automate markets for crypto and digital assets. AMM protocols combine pooled liquidity with innovative algorithms to determine the prices between two or more tokenized assets. In the future, similar AMM protocols could form the basis for a new generation of financial infrastructures facilitating the cross-border exchange of CBDCs.
