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Successful Cross-Border CBDC Trials Conducted by Singapore, Switzerland, and France

Published September 28, 2023 1:04 PM
Teuta Franjkovic
Published September 28, 2023 1:04 PM

Key Takeaways

  • Project Mariana successfully passed tests for cross-border trading and settlement of wholesale CBDCs.
  • The project utilized DeFi technology to simulate cross-border trading of hypothetical EUR, SGD, and CHF CBDCs.
  • It employed a common token standard and a specialized DEX for automated spot foreign exchange transactions.
  • The project represents a significant step in research on the implementation of CBDCs for cross-border transactions.

Project Mariana, an initiative aimed at the cross-border trading and settlement of wholesale central bank digital currencies (wCBDCs), has successfully completed  its testing phase, thanks to the Bank for International Settlements (BIS) cooperation with the central banks of France, Singapore, and Switzerland.

This significant accomplishment illustrates how public blockchain-based solutions and decentralized finance (DeFi) ideas have the ability to transform the infrastructures of the financial markets.

Project Mariana, created by the Monetary Authority of Singapore, the Swiss National Bank, Banque de France, and three BIS Innovation Hub centers, tested the trading and settlement of fictitious wCBDCs, especially euros, Singapore dollars, and Swiss francs, between fictitious financial institutions.

The project made use of the potential of three key components: an Automated Market Maker (AMM), bridges for the seamless transfer of wCBDCs between networks, and a common technical token standard.

The automatic pricing and quick settlement of spot FX transactions is possible thanks to the AMM, by combining the liquidity of the hypothetical wCBDCs and using cutting-edge algorithms. These protocols may serve as the building blocks for the upcoming infrastructures of the financial markets, facilitating effective cross-border trade and settlement.

The exchange and interoperability of wCBDC across various local payment systems managed by participating central banks was made possible by the use of a single token standard on a public blockchain. This strategy involves adding a global perspective to the current wCBDC design investigations.

Additional Research Is Necessary

The BIS Innovation Hub and its international partners recognise the need for additional study and experimentation due to the developing nature of these technologies, even if the initiative represents a significant step in exploiting tokenization and DeFi technologies.

Project Mariana, according  to Emmanuelle Assouan, Director General for Financial Stability and Operations at the Banque de France, is a “novel experiment” looking at workable ways for exchanging multiple-CBDCs in a network that is globally interoperable. The initiative, she continued, offers a thorough investigation of AMMs, revealing prospects for foreign exchange markets based on Distributed Ledger Technologies (DLTs).

According to reports, Project Mariana sought a balanced architecture that matched the domestic control and autonomy that central banks require with the desire of financial institutions to hold, move, and settle wCBDCs internationally.

Despite the fact that Project Mariana was a success, it’s crucial to remember that it was only an experiment and that the partner central banks did not intend to issue wCBDCs or support DeFi or a specific technological solution. However, Project Mariana, the first cross-center project for the Innovation Hub, was thought to offer a strong foundation for improving cross-border payments.

The conclusions from Project Mariana, as described in a study by BIS, provide important knowledge on using DLT for international wholesale CBDC settlements as well as the possible advantages and drawbacks of employing AMMs for FX trading.

However, as we progress toward achieving commercial viability, adopting monetary policy, and integrating wCBDCs into a larger tokenized financial system, it’s evident that we require more study and collaboration.

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