Finextra:BIS and three central banks to test cross-border CBDCs using DeFi protocols
03 November 2022
With a primary focus on the ability to settle foreign exchange trades, the project involves the Eurosystem, Singapore and Switzerland BIS Innovation Hub Centres together with the Bank of France, Monetary Authority of Singapore and Swiss National Bank.
The Bank for Inernational Settlements is working with
three central banks to explore cross-border CBDC trading and settlement
using DeFi protocols.
The new project, dubbed Mariana, explores automated market makers (AMM)
for the cross-border exchange of hypothetical Swiss franc, euro and
Singapore dollar wholesale CBDCs.
With a primary focus on the
ability to settle foreign exchange trades, the project involves the
Eurosystem, Singapore and Switzerland BIS Innovation Hub Centres
together with the Bank of France, Monetary Authority of Singapore and
Swiss National Bank. The aim is to deliver a proof of concept by
mid-2023.
Today, 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 tokenised assets.
In
the future, says the BIS, similar AMM protocols could form the basis for
a new generation of financial infrastructures facilitating the
cross-border exchange of CBDCs.
"This pioneering project pushes
our CBDC research into innovative frontiers, incorporating some of the
promising ideas of the DeFi ecosystem" says Cecilia Skingsley, head of
the BIS Innovation Hub. "Mariana also marks the first collaboration
across Innovation Hub Centres; expect to see more in the future."
The
Monetary Authority of Singapore already has its own DeFi project,
Guardian, which has run its first live pilot transactions with DBS Bank,
JPMorgan and SBI Digital Asset Holdings. A live cross-currency
transaction with real-world assets was conducted as an isolated exercise
using tokenised JPY and SGD deposits, alongside a simulated test
involving the buying and selling of tokenised government bonds.
Moving
forward, MAS is launching two new industry pilots - on trade finance
with Standard Chartered and in wealth management with HSBC and UOB.
Finextra
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