BIS is exploring the integration of DeFi technology into forex markets

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(Kitco News) – The Bank for International Settlements (BIS) Innovation Hub has announced the launch of a new project aimed at exploring central bank digital currencies (CBDCs) and decentralized finance (DeFi) protocols.

The new initiative is called “Project Mariana” and includes the participation of the central banks of France, Singapore and Switzerland. The project intends to study automated market makers (AMM) for cross-border exchanges of hypothetical wholesale CBDCs in Swiss Francs, Euros and Singapore Dollars.

“It will seek to examine the potential between financial institutions to settle foreign exchange transactions in the financial markets,” the BIS said.

To complete the project, the Eurosystem, Singapore and Switzerland BIS Innovation Hub Centers are working with the Bank of France, the Monetary Authority of Singapore and the Swiss National Bank to deliver a proof of concept by mid-2023.

“Project Mariana uses DeFi protocols to automate foreign exchange markets and settlements, potentially enhancing cross-border payments,” according to the BIS.

One of the main focuses of the study are AMMs that combine pooled liquidity with innovative algorithms to determine prices between two or more tokenized assets.

“In the future, similar AMM protocols could form the basis for a new generation of financial infrastructure that will facilitate cross-border exchanges of CBDCs,” the BIS said.

The overall goal of the project is to study the integration of DeFi technology into the traditional financial system in order to improve its efficiency.

“This groundbreaking project pushes our CBDC research to innovative frontiers and integrates some of the promising ideas of the DeFi ecosystem,” said Cecilia Skingsley, Head of the BIS Innovation Hub. “Mariana also marks the first collaboration between Innovation Hub Centres; Expect to see more in the future,” she added.

The BIS has had a busy 2022 in terms of its blockchain technology and cryptocurrency related activities. In September, the Central Bank for Central Banks launched Project Icebreaker, a joint exploration with the central banks of Israel, Norway and Sweden into how central bank digital currencies can be used for international retail and remittance payments. According to a recent report by the BIS, 90% of the world’s central banks are currently investigating the benefits of CBDCs.

In October, the organization released the results of its Genesis 2.0 initiative, which explored the use of blockchain, smart contracts, and the Internet of Things (IoT) to make the green financial market more efficient and effective.

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