The Bank for International Settlements (BIS) said elements of DeFi could underpin the next wave of financial market infrastructure.
Project MarianaThe BIS central bank digital currency (CBDC) pilot program has now been completed, said a report released on Thursday. The project tested cross-border trading and settlement of CBDCs between financial institutions, using innovations derived from DeFi.
“DeFi elements tested in the project, particularly automated market makers, could form the basis for a new generation of financial market infrastructures,” the BIS Innovation Hub said.
Cross-border wholesale CBDC settlement
The report describes how it “borrowed ideas and concepts from decentralized finance.” It added that studies have been conducted to determine whether automated market makers can simplify currency trading and settlement.
The project tested whether automated market makers could increase market efficiency and reduce settlement risk. This involved the cross-border trading and settlement of hypothetical wholesale CBDC versions of the Swiss franc, euro and Singapore dollar. These transactions were simulated between the central banks of France, Singapore and Switzerland, using an automated market maker.
“The project has successfully demonstrated the feasibility of exchanging CBDC at wholesale level across borders using new concepts such as automated market makers,” the report said. It added that “DeFi technologies are still in their infancy and further research and experimentation are needed.”
The BIS Innovation Hub said it plans to continue exploring the benefits and challenges of DeFi, based on relevant use cases.