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Mariana: CBDCs in Automated Market Makers

Summary:
Three BIS innovation hubs plan to test DeFi inspired liquidity pools to exchange wCBDCs. BIS press release: Project Mariana will use DeFi protocols to automate foreign exchange markets and settlement. Automated market makers can become the basis for new generation of financial infrastructure. Exploration on cross-border exchange of wholesale CBDCs is the first to involve three Hub centres. The BIS Innovation Hub is launching a new project around central bank digital currencies (CBDCs) and Decentralised Finance (DeFi) protocols as part of its 2022 work programme. Project Mariana explores automated market makers (AMM) for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs. It will seek to examine the potential between financial institutions

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Three BIS innovation hubs plan to test DeFi inspired liquidity pools to exchange wCBDCs. BIS press release:

  • Project Mariana will use DeFi protocols to automate foreign exchange markets and settlement.
  • Automated market makers can become the basis for new generation of financial infrastructure.
  • Exploration on cross-border exchange of wholesale CBDCs is the first to involve three Hub centres.

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

Project Mariana explores automated market makers (AMM) for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs. It will seek to examine the potential between financial institutions to settle foreign exchange trades in financial markets.

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.

Project Mariana uses DeFi protocols to automate foreign exchange markets and settlement, potentially improving cross-border payments (and supporting a priority of the Group of 20). 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, similar AMM protocols could form the basis for a new generation of financial infrastructures facilitating the cross-border exchange of CBDCs.

Dirk Niepelt
Dirk Niepelt is Director of the Study Center Gerzensee and Professor at the University of Bern. A research fellow at the Centre for Economic Policy Research (CEPR, London), CESifo (Munich) research network member and member of the macroeconomic committee of the Verein für Socialpolitik, he served on the board of the Swiss Society of Economics and Statistics and was an invited professor at the University of Lausanne as well as a visiting professor at the Institute for International Economic Studies (IIES) at Stockholm University.

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