Singapore BIS Monetary Authority and central banks of Switzerland, France explore AMMs and CBDCs

The Innovation Hub of the Bank for International Settlements (BIS) is leading a project to explore the use of Defi protocols to automate foreign exchange markets and settlement, CBDC payments via automated market makers (AMMs), according to a Nov. 2 blog post.

Named Project Mariana, its participants include the Bank of France, the Swiss National Bank, and the Monetary Authority of Singapore (MAS).

Experimenting with cross-border CBDC payments via AMMs

The project’s focus areas are to improve cross-border CBDC payments using AMMs, investigate the feasibility of a supra-regional network to serve as a trusted hub for cross-border settlement, and conduct research on CBDC governance models.

The participants will experiment with the use of AMMs protocols to facilitate hypothetical future wholesale CBDCs of their respective countries. Instead of using a traditional order book or board to connect buyers and sellers in a consensus market environment, these AMM protocols will aggregate pooled liquidity with pre-made algorithms to determine and offer real-time prices between CBDC trading pairs via a smart contract and without reliance on an intermediary on a 24/7 basis.

BIS expects to see the project result in AMM infrastructures explored throughout the project to become the blueprint for financial institutions to settle foreign exchange trades and cross-border exchange of CBDCs and the deliverance of a proof of concept by mid-2023.

Project Mariana is the latest in a series of initiatives by the BIS to explore cross-border CBDC exchange and settlements. In Mar 2021, BIS completed its first retail CBDC system project, Project Aurum, carried out in partnership with the Hong Kong Monetary Authority, which studied intermediate CBDCs and CBDC-backed stablecoins. The architecture of which involved a wholesale interbank system built on the blockchain with DLT nodes hosted by central banks, and a retail e-wallet system for storing and receiving CBSC tokens.

In Sept 2022, BIS completed its second latest CBDC project, Project mBridge, which successfully facilitated $22 million worth of real-value cross-border transactions between the Hong Kong Monetary Authority (HKMA) and the central banks of Thailand, China, and the United Arab Emirates.

Other CBDC projects by BIS include Project Dubar in Mar 2022 and Project Jura from Dec 2021, both of which are ongoing explorations of leveraging a common platform powered by distributed ledger technology for multiple banks to facilitate low-cost, fast and secure cross-border CBDC payments.