Interim Project Report: BIS and 3 Central Banks Explore DeFi Technology for wCBDC FX

**Project Mariana: Exploring Wholesale Central Bank Digital Currency in Tokenized Forex Trading**

The Bank for International Settlements (BIS) Innovation Hub has collaborated with the central banks of France, Singapore, and Switzerland to conduct Project Mariana. This project aims to assess the use of wholesale central bank digital currency (wCBDC) in tokenized foreign exchange (forex) trading. The recently published interim report delves into various aspects such as credit and settlement risk, as well as interoperability.

Exploring the Feasibility of International FX Interbank Market with wCBDCs

Project Mariana focuses on the feasibility of establishing an international FX interbank market using wCBDCs on a blockchain-based network. To achieve this, the project examines automated market makers (AMMs), token standards, and network bridges. AMMs are smart contracts commonly used in decentralized finance that facilitate trading and settlement of tokenized assets in a single step. By utilizing AMMs, risks can be reduced. However, the development of technical specifications for the wCBDCs, AMMs, and bridges is crucial for successful implementation.

The Role of Liquidity Pools and Bonding Curves in AMM Design

A significant element of the proposed AMM design in Project Mariana is the inclusion of liquidity pools and bonding curves. The bonding curve determines the price-fixing mechanism for the traded assets. Liquidity pools can replace traditional order books used to match buyers and sellers. In this model, commercial banks would form the liquidity pool, and all currencies involved in the project would be included. Access to the trading system would be controlled by whitelists maintained by the central banks.

Implementing Project Cedar Phase II x Ubin+: A Different Approach to Liquidity

A different approach to liquidity can be observed in Project Cedar Phase II x Ubin+, a collaboration between the Singapore Monetary Authority and the Federal Reserve Bank of New York. This project utilized a “vehicle currency” for trades involving non-tokenized currencies with varying levels of liquidity.

Project Mariana’s Timeline and Future Reports

Project Mariana was initiated in November and has followed its planned timeline. The interim report has been released as scheduled, with the final report expected to be published by the end of the year.

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