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Sunday, July 21, 2024

BIS and Central Banks Make Waves with Successful CBDC Test in Project Mariana

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The Bank for International Settlements (BIS) and the central banks of France, Singapore, and Switzerland just recently announced the successful completion of a new CBDC initiative called Project Mariana.

This project tested cross-border trading and settlement of wholesale central bank digital currencies (wCBDCs) between financial institutions.

BIS and Central Banks Collaborate on CBDC Test

As per reports, the novel project leverages the concepts of Decentralized Finance (DeFi) technology on a public blockchain, possibly bringing a new dawn in the digital currency world.

This new collaboration between BIS Innovation Hub centers in Switzerland, Singapore, and the Eurosystem, together with Banque de France, Monetary Authority of Singapore, and Swiss National Bank, has successfully validated the trading and settlement of hypothetical euro, Singapore dollar, and Swiss franc wCBDCs.

During the process, discussions were held regarding crucial aspects, such as establishing a standardized technical token and creating bridges to facilitate seamless wCBDC transfers. Furthermore, the consortium of central banks delved into the Automated Market Maker (AMM) concept, enabling automatic pricing and execution of spot FX transactions.

The inclusion of DeFi technology, like automated market makers, could pave the way for a new generation of financial market infrastructures. Project Mariana’s architecture balances central banks’ domestic need for oversight and the interest of financial institutions to hold, transfer, and settle wCBDC across borders efficiently.

However, according to the reports, this is merely an experimental phase. BIS intends to investigate further the opportunities and obstacles tied to CBDC and its associated technologies in collaboration with its partners. While engaging with prominent banking counterparts, partner central banks must indicate their intention to issue wCBDC or endorse DeFi.

When speaking about these developments, the Director General for Financial Stability and Operations at Banque de France, Emmanuelle Assouan, said:

“Mariana is a novel experiment in several aspects. We have developed a practical solution to exchange multi-CBDCs in a global network interoperable with regional platforms on which the CBDC of each jurisdiction is issued. This could be a forerunner for the functioning of cross-border payments in the future.”

Despite the progress, tokenization and DeFi technologies remain nascent, and further research is required. Mariana is a cornerstone in improving cross-border payments and will likely feature at the Banque de France conference on Oct. 3.

Building on Last Year’s Success

Only last year, BIS collaborated with several other central banks from Hong Kong SAR, Thailand, mainland China, and the United Arab Emirates to complete a cross-border digital currency pilot.

Based on reports, the mBridge involved around 20 banks conducting 164 payment and foreign exchange transactions over six weeks, with transactions exceeding $22 million settled directly on the mBridge platform.

This year’s involvement in the CBDC test marks more strides towards using blockchain for settlements by the BIS. However, based on the documentation, more experiments and trials will continue.

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