BIS Innovation Hub is launching a project around central bank digital currencies (CBDCs) and Decentralised Finance (DeFi) protocols as part of its 2022 work programme.

Dubbed Project Mariana, it explores automated market makers (AMM) for cross-border exchanges of the hypothetical Swiss franc, Euro, and Singapore dollar wholesale CBDCs. It also evaluates the potential between financial institutions to settle foreign exchange trades in the financial market.

Involved in the project are the Eurosystem, Singapore, and Switzerland BIS Innovation Hub Centres, Bank of France, Monetary Authority of Singapore, and Swiss National Bank, with the aim of delivering a proof of concept by mid-2023.

Project Mariana automates foreign exchange markets and settlement by applying DeFi protocols with the potential to improve cross-border payments.

DeFi is built on public blockchains that automate markets for crypto and digital assets through the application of smart contract protocols. Pooled liquidity and innovative algorithms determine the prices between two or more tokenised assets.

For future cross-border exchange of CBDCs, similar AMM protocols could be used by new financial infrastructures.

Head of the BIS Innovation Hub, Cecilia Skingsley, said,

“This pioneering project pushes our CBDC research into innovative frontiers, incorporating some of the promising ideas of the DeFi ecosystem. Mariana also marks the first collaboration across Innovation Hub Centres; expect to see more in the future.

Featured image credit: Edited based on photo by Keming Tan from Unsplash