The joint project "Mariana" of the Swiss National Bank (SNB), Banque De France, Monetary Authority of Singapore (MAS) and the BIS Innovation Hub investigates cross-border trading as well as the settlement of wholesale CBDCs using DeFi protocols.
The project explores automated market maker (AMM) protocols for the cross-border exchange of hypothetical central bank digital currencies (CBDCs) in Swiss francs, euros and Singapore dollars between financial institutions for the settlement of foreign exchange transactions in financial markets. This is a continuation of the two projects "Helvetia" and "Jura".
Automated FX markets on the Blockchain
Mariana uses decentralized financial protocols (DeFi) to automate currency markets and settlements, potentially improving cross-border payments (supporting a G20 priority). Today, decentralized financial applications on public blockchains use so-called smart contract protocols to automate cryptocurrency and digital asset markets. Automated Market Makers (AMMs) combine pooled liquidity with innovative algorithms to determine prices between two or more tokenized assets.
According to the SNB, similar DeFi protocols could form the basis for a new generation of financial infrastructures in the future, facilitating the cross-border exchange of CBDCs. Mariana involves Switzerland's BIS Innovation Hub Centres, the Eurosystem and the Singapore Dollar, as well as the Banque de France, the Monetary Authority of Singapore and the Swiss National Bank. The goal is to deliver a proof of concept by mid-2023.
Is the CBDC franc on the horizon?
The SNB has been exploring the potential of a central bank digital currencies (CBDC) for some time. In mid-2021, the Swiss monetary authority examined some specific use cases for the technology and published a detailed research paper on the issuance of a digital franc. In doing so, the SNB expressed numerous concerns around the concept of a CBDC. Nevertheless, the topic remains exciting, as the Mariana project illustrates.
"Cross-border trading of foreign currencies involving wholesale CBDCs requires a blockchain-compatible FX market infrastructure. Building on such an infrastructure, Project Mariana is investigating whether automated market makers (AMMs) can efficiently price wholesale CBDC exchanges. We look forward to testing this with our partners." - Andréa M. Maechler, Member of the Governing Board of the Swiss National Bank
