Singapore concludes joint project using decentralised finance technology
THE Bank for International Settlements (BIS) and the central banks of France, Singapore and Switzerland have concluded a joint project that tested cross-border wholesale central bank digital currencies (CBDCs).
Named Project Mariana, it was developed by three BIS Innovation Hub centres and the central banks.
It tested the cross-border trading and settlement of wholesale CBDCs between financial institutions, using new decentralised finance (DeFi) technology concepts on a public blockchain.
This was accomplished using an automated maker to pool the liquidity of hypothetical wholesale CBDCs with algorithms, enabling spot forex transactions to priced and executed automatically, and settled immediately.
“These protocols could be used by the next generation of financial market infrastructures facilitating cross-border trading and settlement between financial institutions,” said BIS and its central bank partners in a joint statement on Thursday (Sep 28).
They said the project’s architecture “balances central banks’ domestic need for oversight and autonomy with financial institutions’ interest in efficiently holding, transferring and settling wholesale CBDC across borders”.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
In so doing, it offers possible approaches to factoring an international dimension into current wholesale CBDC design explorations, they added.
Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore, viewed the collaboration as demonstration of the potential of open and interoperable networks.
“The project explored how multi-currency settlement may be performed atomically, while maintaining the independence of respective domestic settlement systems,” said Mohanty.
“This collaboration enables central banks to explore and better understand the policy, governance and technical implications of using automated market markers to facilitate foreign exchange.”
BIS and its partners said they will continue exploring the benefits and challenges of tokenisation and DeFi technologies based on relevant use cases.
“Project Mariana is purely experimental and does not indicate that any of the partner central banks intend to issue wholesale CBDC or endorse DeFi or a particular technological solution.”
Copyright SPH Media. All rights reserved.
