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.