BIS and Central Banks of France, Singapore, and Switzerland Successfully Test CBDC Using DeFi

The Bank for International Settlements (BIS), partnering with France, Singapore, and Switzerland’s central banks, achieved a milestone by successfully testing cross-border wholesale CBDC trading and settlement

‘Project Mariana,’ a forward-looking initiative, explored leveraging DeFi technology to transform CBDC usage in cross-border transactions.

The project’s main goal was to explore how CBDCs could enable smooth cross-border trade and settlement for central banks. In a hypothetical scenario, CBDCs denominated in euros, Singapore dollars, and Swiss francs facilitated cross-border transactions among simulated financial institutions.

At the heart of Project Mariana was the adoption of cutting-edge DeFi concepts integrated into a public blockchain. This approach aimed to create a standardized token protocol to ensure interoperability and effortless exchange of wholesale CBDCs across various local payment and settlement systems managed by participating central banks.

These changes diverge significantly from traditional finance, suggesting a potential revolution in cross-border transactions for central banks and financial institutions.

DeFi Technology Transforms CBDC Landscape

Project Mariana tested Automated Market Makers, which pool the liquidity of hypothetical Swiss franc, euro and Singapore dollar wholesale #CBDC using innovative algorithms that enable spot FX transactions #BISInnovationHub @Mas_org @banquedefrance @SNB_BNS https://t.co/GsNLpXZlsD pic.twitter.com/z9YJj1HCcB

— Bank for International Settlements (@BIS_org) September 28, 2023

While the project is considered a success, it’s essential to underline its experimental nature. Participating central banks stress that Project Mariana doesn’t imply CBDC issuance or endorsement of particular DeFi solutions. Instead, the project serves as a pivotal experiment that explores the possibilities of this groundbreaking technology.

Cecilia Skingsley, Head of the BIS Innovation Hub, commented on the project’s achievements, emphasizing that “Project Mariana pioneers the use of novel technology for interbank foreign exchange markets.” Like decentralized exchanges, the project’s standout: Automated Market Makers (AMMs) offer innovative solutions for future financial market infrastructures.

Furthermore, the project highlighted smart contracts’ role in central banks’ wholesale CBDC management without direct blockchain platform control. These DeFi elements, particularly AMMs, could lay the foundation for the next generation of financial market infrastructures.