The Bank for International Settlements (BIS) and the central banks of Singapore, France, and Switzerland have begun a new initiative to examine the feasibility of merging certain decentralized finance (DeFi) characteristics with central bank digital currencies (CBDCs).
The BIS unveiled a new “Project Mariana” on Wednesday, which would investigate the use of automated market makers (AMMs) to automate foreign currency markets and settlement, and perhaps enhance cross-border payments.
According to the BIS, an AMM is a sort of smart contract that uses liquidity pools to transfer digital assets automatically, as opposed to the conventional method of matching buyers and sellers.
As DeFi and its applications have the potential to become systemically significant components of the financial ecosystem, central banks must comprehend their influence on cross-border payments, according to the BIS.
The BIS indicated that such AMM protocols might serve as the foundation for a new generation of financial infrastructures that support cross-border CBDC transactions.
In partnership with the central banks of Thailand, China, the United Arab Emirates, and Hong Kong, the BIS released last week a report on its mBridge pilot project exploring CBDC cross-border transfers.
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