BIS Launches Project Mariana for DeFi FX

The Bank for International Settlements (BIS), with the central banks of France, Singapore and Switzerland, has launched Project Mariana, the latest initiative from the BIS Innovation Hub to study the use of DeFi protocols to automate FX markets and settlement.

The BIS says As DeFi and its applications have the potential to become systemically important parts of the financial ecosystem, central banks need to understand their impact for cross-border payments. The new work explores automated market makers for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs (central bank digital currencies). It will seek to examine the potential between financial institutions to settle FX 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. It has three main objectives; to explore the design and application of automated market makers for wCBDCs; investigate if a supra-regional network could work as an efficient and trusted hub for cross-border settlement; and research wCBDC governance models within that network. The aim is to deliver a proof of concept by mid-2023.

Project Mariana seeks to improve cross-border payments (and support a priority of the Group of 20), using DeFi built on public blockchains that uses smart contract protocols to automate markets for crypto and digital assets. The automated market maker protocols combine pooled liquidity with algorithms to determine the prices between two or more tokenised assets. In the future, similar protocols could form the basis for a new generation of financial infrastructures facilitating the cross-border exchange of CBDCs, BIS observes.

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