Project Mariana: CBDCs in automated market-makers

Decentralised finance (DeFi) employs public blockchain networks and smart contracts to build open, transparent, composable and non-custodial financial protocols. Today, one of the main activities in DeFi is the decentralised exchange of tokenised assets via so-called automated market makers (AMMs). These are a kind of smart contract that uses liquidity pools to transfer digital assets automatically, as opposed to the traditional process of matching buyers and sellers and seeking consent for each operation. As DeFi and its applications have the potential to become systemically important parts of the financial ecosystem, central banks need to understand their impact for cross-border payments.

Project Mariana investigates the use of AMMs to automate foreign exchange markets and settlement, potentially improving cross-border payments. AMM protocols that combine pooled liquidity with innovative algorithms to determine the prices between two or more tokenised assets could form the basis for a new generation of financial infrastructures facilitating the cross-border exchange of CBDCs. Thus, the project provides significant contributions to the G20 priority of making cross-border payments faster, cheaper and more transparent.

Project Mariana is a joint project between the Switzerland, Singapore, and Eurosystem BIS Innovation Hub Centres, the Bank of France, the Monetary Authority of Singapore and the Swiss National Bank. The project explores the use of AMMs for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs between financial institutions to settle foreign exchange trades in financial markets.

The project has three main objectives: (i) explore the design and application of AMMs for wCBDCs; (ii) investigate if a supra-regional network could work as an efficient and trusted hub for cross-border settlement; and (iii) research wCBDC governance models within that network.