In a recent collaboration, the Bank for International Settlements (BIS) Innovation Hub, along with the central banks of France, Singapore, and Switzerland, has published an interim report on Project Mariana. This project aims to explore the use of wholesale central bank digital currency (wCBDC) in tokenized foreign exchange (FX) trading. The report focuses on reducing settlement risk, creating liquidity pools through automated market makers (AMMs), and ensuring interoperability.
Project Mariana investigates the feasibility of establishing an international FX interbank market using wCBDCs on a blockchain-based network. AMMs, which are smart contracts used in decentralized finance, play a crucial role by enabling trading and settlement of tokenized assets in a single step. By implementing AMMs, the project aims to mitigate risk associated with traditional trading and settlement processes.
To achieve this, technical specifications need to be developed for both wCBDCs and AMMs. Additionally, network bridges serving as on- and off-ramps between the international network and domestic platforms require consideration. The proposed AMM design includes a liquidity pool and a bonding curve. The liquidity pool, consisting of multiple currencies involved in the project, replaces the conventional order books used to match buyers and sellers. Access to the trading system is controlled by whitelists maintained by the participating central banks.
Project Mariana’s approach differs from the Singapore Monetary Authority and the Federal Reserve Bank of New York’s Project Cedar Phase II x Ubin+, which utilized a “vehicle currency” for trades involving non-tokenized currencies of varying liquidity.
Launched in November, Project Mariana remains on schedule as it released its interim report. The project aims to publish a final report by the end of the year.
This innovative exploration of DeFi technology and wCBDCs in foreign exchange trading holds significant implications for the adoption of CBDCs globally. It opens new possibilities for the integration of traditional finance (TradFi) with decentralized finance (DeFi), paving the way for future advancements in the financial ecosystem.
Keywords:
Wholesale Central Bank Digital Currency (wCBDC), Project Mariana, Automated Market Makers (AMMs), Decentralized Finance (DeFi), Foreign Exchange (FX) Trading, Liquidity Pool, Interim Report, Tokenized Assets, Interoperability, Central Banks.