Bank of International Settlement will test DeFi implementation in forex CBDC markets
According to a new announcement on Wednesday, the Bank of International Settlement, or BIS, along with the central banks of France, Singapore, and Switzerland, will be embarking on a new initiative dubbed "Project Mariana" in its exploration of blockchain technology. Project Mariana intends to use decentralized finance, or DeFi, protocols to automate foreign exchange markets and settlement.
Project Mariana explores using automated market makers for the cross-border exchange of hypothetical CHF, EUR and S$ wholesale CBDCs. It's a #BISInnovationHub joint venture with the French, Swiss & Singapore #CentralBanks@banquedefrance @MAS_sg @SNB_BNS https://t.co/GsNLpXZlsD pic.twitter.com/2tMitZcNF2
This includes using DeFi protocols to stimulate the hypothetical exchange of cross-border transactions between the Swiss Franc, Euro, and Singaporean Dollar wholesale central bank digital currencies, or CBDCs. The technologies involved in building Project Mariana include that of smart contracts and automated market maker protocols, or AMMs. Researchers seek to combine pooled liquidity in AMMs with innovative algorithms to determine the prices of tokenized assets, potentially developing into a basis of exchanges for CBDCs.
As an organization created by central banks to regulate the international financial framework, BIS wrote that, "automated market makers can become the basis for a new generation of financial infrastructure." Cecilia Skingsley, head of innovation hub at BIS, added:
BIS and collaborating central banks have set a tentative date of mid-2023 for delivering a proof of concept. The financial institution was previously skeptical of digital assets due to their inherent price variance and lack of a unified regulatory framework.
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