The Bank for International Settlements (BIS) is collaborating with three central banks to investigate cross-border Central Bank Digital Currency (CBDC) trading and settlement through decentralized finance (DeFi) protocols.
This new initiative, named Mariana, focuses on automated market makers (AMMs) to facilitate the cross-border exchange of hypothetical wholesale CBDCs for the Swiss franc, euro, and Singapore dollar. The project brings together the Eurosystem, the Monetary Authority of Singapore, and the Swiss National Bank, along with the BIS Innovation Hub Centres, with a goal to deliver a proof of concept by mid-2023.
Currently, DeFi platforms that operate on public blockchains employ smart contract protocols to automate the trading of cryptocurrencies and digital assets. AMM protocols utilize pooled liquidity and advanced algorithms to set prices between multiple tokenized assets.
According to the BIS, similar AMM protocols could lay the groundwork for a new generation of financial infrastructures that support the cross-border exchange of CBDCs in the future. “This pioneering project pushes our CBDC research into innovative frontiers, incorporating some of the promising ideas of the DeFi ecosystem,” commented Cecilia Skingsley, head of the BIS Innovation Hub. “Mariana also marks the first collaboration across Innovation Hub Centres, and we can expect to see more of this in the future.”
Additionally, the Monetary Authority of Singapore has initiated its own DeFi project called Guardian, which has successfully executed its first live pilot transactions with DBS Bank, JPMorgan, and SBI Digital Asset Holdings. This encompassed a live cross-currency transaction involving tokenized Japanese yen and Singapore dollar deposits, alongside a simulated test for the buying and selling of tokenized government bonds.
Moving ahead, the Monetary Authority of Singapore plans to launch two new industry pilots focused on trade finance with Standard Chartered, and wealth management with HSBC and UOB.