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BIS and Central Banks Complete Test of Cross-Border Trading of CBDCs

CBDC

The Bank for International Settlements (BIS) and three central banks concluded a central bank digital currency (CBDC) project.

Project Mariana was developed by three BIS Innovation Hub centers along with the Bank of France, the Monetary Authority of Singapore and the Swiss National Bank. It tested the cross-border trading and settlement of hypothetical euro, Singapore dollar and Swiss franc wholesale central bank digital currencies (wCBDCs) between simulated financial institutions using decentralized finance (DeFi) technology concepts on a public blockchain, the BIS said in a Thursday (Sept. 28) press release.

The success of Project Mariana relied on three main elements, according to the release. Firstly, a common technical token standard provided by a public blockchain facilitated the exchange and interoperability between different currencies. Secondly, bridges were created to enable seamless transfer of wCBDCs between different networks. Lastly, an Automated Market Maker (AMM), a type of decentralized exchange, was used to automatically trade and settle spot foreign exchange (FX) transactions.

The AMM pooled the liquidity of the hypothetical wCBDCs, allowing spot FX transactions to be priced, executed and settled immediately, the release said. These protocols have the potential to be used by the next generation of financial market infrastructures, facilitating cross-border trading and settlement between financial institutions.

Project Mariana’s architecture struck a balance between central banks’ need for oversight and autonomy and financial institutions’ interest in efficiently holding, transferring and settling wCBDCs across borders, per the release. This was achieved using a common token standard on a public blockchain, facilitating interoperability and seamless exchange of wCBDCs across various local payment and settlement systems maintained by participant central banks.

The project was experimental and does not indicate any intention by the partner central banks to issue wCBDCs or endorse DeFi or a specific technological solution, according to the release.

“Project Mariana pioneers the use of novel technology for interbank foreign exchange markets,” Cecilia Skingsley, head of the BIS Innovation Hub, said in the release. “It successfully demonstrated that it is feasible to exchange wholesale CBDC across borders using novel concepts such as automated market makers.”

The BIS reported in July that 93% of central banks are involved in some sort of CBDC project, that uncertainty about short-term CBDC issuance is waning, and that there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030.

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