The Bank for International Settlements (BIS), along with the central banks of France, Singapore, and Switzerland, has collaboratively announced the successful testing of cross-border trading and settlement for wholesale central bank digital currencies (wCBDCs).
Notably, this test integrated concepts from innovative decentralized finance (DeFi) technology and was implemented on a public blockchain. This marks a significant step forward in exploring the potential applications and interoperability of central bank digital currencies in a cross-border context.
Project Mariana Tested Cross-Border Trading Using CBDCs
Project Mariana, a collaborative effort between the BIS Innovation Hub centers in Switzerland, Singapore, and the Eurosystem Hub Centers, alongside the Bank of France, Monetary Authority of Singapore, and Swiss National Bank, has successfully demonstrated the feasibility of cross-border trading and settlement. This involved hypothetical wholesale central bank digital currencies (wCBDCs) denominated in euros, Singapore dollars, and Swiss francs, with the participation of simulated financial institutions.
The project’s success relied on three pivotal elements:
1. Common Technical Token Standard: A standardized token provided by a public blockchain, enhancing interoperability and facilitating the exchange between various currencies.
2. Bridges for Seamless Transfer: Mechanisms ensuring the frictionless transfer of wCBDCs across different networks, promoting smooth cross-border transactions.
3. Automated Market Maker (AMM): The inclusion of a specialized decentralized exchange that enables automatic pricing, execution, and immediate settlement of spot FX transactions, contributing to the efficiency of the trading and settlement process.
The Automated Market Maker (AMM) in Project Mariana successfully pooled liquidity from the hypothetical euro, Singapore dollar, and Swiss franc wholesale central bank digital currencies (wCBDCs). Innovative algorithms were employed to automatically price and execute spot foreign exchange (FX) transactions.
The overarching goal of this project was to explore and develop next-generation financial market infrastructures. These infrastructures are specifically designed to enhance and streamline cross-border trading and settlement processes among financial institutions. The successful utilization of AMM and innovative algorithms reflects a significant step toward achieving more efficient and automated cross-border financial transactions.
Project Leverages Public Blockchain to Enable Seamless Exchange
Project Mariana leverages a common token standard on a public blockchain, providing the capability for seamless exchange and interoperability across various local payment and settlement systems maintained by participating central banks. This innovative approach offers valuable insights into integrating an international dimension into the ongoing design explorations of wholesale central bank digital currencies (wCBDCs).
The report acknowledges that while Project Mariana represents a significant advancement, it’s crucial to recognize that tokenization and decentralized finance (DeFi) technologies are still in their early stages of development.
Cecilia Skingsley, Head of the BIS Innovation Hub, emphasized the pioneering nature of Project Mariana in utilizing novel technology for interbank foreign exchange markets. The project successfully demonstrated the feasibility of exchanging wholesale CBDC across borders by incorporating innovative concepts such as automated market makers.
