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Central Banks Triumph in Wholesale CBDC Cross-Border Trading Trial with DeFi Integration

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Sep 29, 2023 at 12:04 pm

The Bank for International Settlements, in collaboration with the central banks of France, Singapore, and Switzerland, have completed successful trials involving wholesale Central Bank Digital Currencies (wCBDC) for cross-border trading.

This endeavor, referred to as Project Mariana, was aimed at examining how foreign exchange settlements would function in a world where central banks have introduced a CBDC. This comes as an increasing number of nations contemplate the issuance of wholesale CBDCs, a notion previously supported by Banque de France in June, suggesting potential enhancements in cross-border payment systems.

The project employed a theoretical framework, employing wCBDCs representing the euro, Singapore dollar, and Swiss franc, exchanged between simulated financial institutions. It relied on a standardized token format on a public blockchain, facilitating smooth exchange and interoperability of wCBDCs across various local payment and settlement systems overseen by participating central banks, as outlined in an accompanying press release.

Cecilia Skingsley, Head of the BIS Innovation Hub, praised Project Mariana for spearheading the application of cutting-edge technology in interbank foreign exchange markets. The experiment effectively demonstrated the viability of cross-border wCBDC exchanges, incorporating innovative concepts such as automated market makers (AMMs), which operated as a decentralized exchange mechanism.

Moreover, the project made use of smart contracts to empower central banks in managing their wCBDC without the need for direct involvement or control over the underlying platform.

The press release also highlighted that elements from the decentralized finance (DeFi) realm, particularly automated market makers, as examined in the project, could potentially serve as the groundwork for a new generation of financial market infrastructures.

Read more: Unlocking the Future of Money: BIS Chief Calls for Clear Legal Frameworks to Propel CBDCs into the Spotlight

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