The Bank for International Settlements, Swiss National Bank, and two other central banks are exploring cross-border CDBC trading and settlement using DeFi protocols.
The Bank for International Settlements (BIS) in Basel is often referred to as the central bank for central banks. BIS is joined by the Swiss National Bank (SNB), Banque de France (BdF), and the Singapore Monetary Authority (MAS) to explore using decentralized finance (DeFi) protocols to automate foreign exchange markets and settlements in an effort dubbed «Project Mariana», the BIS announced Wednesday.
Project Mariana is being launched through the BIS innovation hub around central bank digital currencies (CBDCs) and Defi protocols as part of its 2022 work program. It will explore the cross-border exchange of wholesale CDBCs and is the first to involve three hub centers. Involved in the project are the Eurosystem, Singapore, and the BIS Innovation Hub Centres together with the BdF, the MAS, and the SNB, with the goal of delivering a proof-of-concept by the middle of next year.
Exploring Potential
At its core, the project explores automated market makers (AMM) for the cross-border exchange of hypothetical Swiss francs, euro, and Singapore dollar wholesale CBDCs. It will seek to examine the potential between financial institutions to settle foreign exchange trades in financial markets.
DeFi built on public blockchains uses smart contract protocols to automate markets for crypto and digital assets. AMM protocols combine pooled liquidity with innovative algorithms to determine the prices between two or more tokenized assets. In the future, similar AMM protocols could form the basis for a new generation of financial infrastructures facilitating the cross-border exchange of CBDCs.
Swiss Fintechs
Swiss fintechs are already embracing Defi. Seba Bank, based in the canton of Zug's «Crypto Valley» is partnering with a Canadian technology company specializing in decentralized finance. The agreement allows the parties to work more closely on asset and investment management, mining services, tokenization, digital capital markets, and institutional research.
Earlier this year, Swiss crypto bank Sygnum launched regulated banking services for leading DeFi tokens, Aave, Aragon, Curve, Maker, Synthetix, Uniswap, and 1inch Network as well as banking services for the stablecoin USDC.
«This pioneering project pushes our CBDC research into innovative frontiers, incorporating some of the promising ideas of the DeFi ecosystem,» said Cecilia Skingsley, Head of the BIS innovation hub. Mariana also «marks the first collaboration across Innovation Hub Centres; expect to see more in the future,» she added.
Crypto City Lugano
The city of Lugano is looking to give Zug a run for its money, or shall we say Luga, the local cryptocurrency. Lugano is investing heavily in promoting itself as a center, as finews.com reported. It seeks to base over 25 young companies in a startup hub, financed through various funds from private sources to raise at least three million Swiss francs. The funds will also be used to provide scholarships to over 500 students in Lugano studying cryptocurrencies and decentralized finance.
