The Bank for International Settlements (BIS) has done this, in collaboration with the central banks of France, Singapore and Switzerland successfully completed the testing phase of Project Mariana, an initiative focused on the cross-border trading and settlement of central bank digital currencies (wCBDCs).
This milestone achievement demonstrates the potential of decentralized finance (DeFi) concepts and public blockchain-based solutions to reshape financial market infrastructures.
Developed by three BIS Innovation Hub centres, Banque de France, the Monetary Authority of Singapore and the Swiss National Bank, Project Mariana tested trading and settlement of hypothetical wCBDCs, specifically Euros, Singapore Dollars and Swiss Francs, between simulated financial institutions.
The project leveraged the potential of three integral elements: a common technical token standard, bridges for seamless transfer of wCBDCs between networks, and an Automated Market Maker (AMM).
The AMM facilitated the automatic pricing and immediate settlement of spot FX transactions. This was achieved by pooling the liquidity of the hypothetical wCBDCs and using innovative algorithms. These protocols could form the basis for the next generation of financial market infrastructures, promoting efficient cross-border trading and settlement.
Project Mariana reportedly sought a balanced architecture that aligns central banks’ domestic needs for supervision and autonomy with financial institutions’ interest in holding, transferring and settling wCBDCs across borders.
The use of a common token standard on a public blockchain facilitates the exchange and interoperability of wCBDC between different local payment systems maintained by participating central banks. This approach suggests that an international dimension should be included in current wCBDC design explorations.
Need for further research.
While the project marks an important step in leveraging tokenization and DeFi technologies, the BIS Innovation Hub and its global partners recognize the need for further research and experimentation due to the evolving nature of these technologies.
Emmanuelle Assouan, Director General for Financial Stability and Operations at Banque de France, emphasized that Project Mariana is a “new experiment” that explores practical solutions for exchanging multi-CBDCs in a global interoperable network. She added that the project provides an in-depth analysis of AMMs, uncovering opportunities for FX markets based on Distributed Ledger Technologies (DLTs).
Despite the successful completion of Project Mariana, it is important to note that the project is purely experimental and does not imply any intention by the central banks of the partner countries to issue wCBDCs or endorse DeFi or any particular technological solution. However, Project Mariana would provide a solid foundation for improving cross-border payments and would serve as the Innovation Hub’s first cross-center project.
The insights from Project Mariana, as detailed in a report from BIS, provide valuable information on leveraging DLT for cross-border wholesale CBDC settlements and the potential benefits and limitations of using AMMs for foreign exchange trading.
Nevertheless, the need for further research and collaboration is clear as the journey toward commercial viability, monetary policy implementation, and the role of wCBDCs in a broader, tokenized financial system continues.