'Project Mariana' by BIS to Investigate CBDC Connection with DeFi

Project Mariana to Investigate Use of AMM

Today, the BIS unveiled a new initiative called "Project Mariana" that would investigate the use of automated market makers (AMMs) for settlement,  possibly enhancing cross-border payments and streamlining foreign exchange markets. The Eurosystem, BIS Innovation Hub Centers in Singapore and Switzerland, the Bank of France, the Monetary Authority of Singapore, and the Swiss National Bank are all partners in the initiative. The goal is to present a proof of concept by the middle of 2023.

According to the BIS, an AMM is a type of smart contract that uses liquidity pools to transmit digital assets electronically rather than the more conventional method of finding buyers and sellers.

Smarts Contracts to Employ DeFi

Currently, smart contract methods are using DeFi, a platform built on public blockchains, to automate marketplaces for cryptocurrencies and digital assets. The pricing between two or more tokenized assets is determined by AMM protocols, which integrate pooled liquidity with cutting-edge algorithms. Future generations of financial infrastructures that enable the exchange of CBDCs across borders can be built on the same AMM protocols.

Cecilia Skingsley, Head of the BIS Innovation Hub, remarked that this groundbreaking 'Project Mariana' pushes the CBDC investigation into novel frontiers, embracing some of the intriguing concepts of the DeFi ecosystem. She further stated that they anticipate witnessing more collaborations like Mariana's. Mariana also represents the first one among Innovation Hub Centers.

Report on mBridge Pilot Project

BIS last week released a report on its mBridge pilot project, which it worked on with the federal reserve of Thailand, China, the United Arab Emirates, and Hong Kong to examine CBDC cross-border payments.