BIS will test DeFi, it’s automated market making technology might be the ” basis for a new generation of financial infrastructure.”
The Bank of International Settlement, or BIS, will launch a new effort dubbed “Project Mariana” in its investigation of blockchain technology, along with the central banks of France, Singapore, and Switzerland, according to a recent announcement on Wednesday. Decentralized finance, or DeFi , protocols will be used by Project Mariana to automate foreign exchange markets and settlement.
This involves employing DeFi protocols to encourage hypothetical cross-border trades in central bank digital currencies, or CBDCs, such as the Swiss Franc, Euro, and Singapore Dollar. Smart contracts and automated market maker protocols, or AMMs, are two of the technologies used in the construction of Project Mariana.
Researchers are working to calculate the pricing of tokenized assets using cutting-edge algorithms and pooled liquidity from AMMs, which might eventually serve as the foundation for CBDC exchanges. Automated market makers can serve as the foundation for a new generation of financial infrastructure, according to BIS, an organization founded by central banks to oversee the global financial system. Cecilia Skingsley, director of the BIS innovation hub, added:
“This pioneering project pushes our CBDC research into innovative frontiers, incorporating some of the promising ideas of the DeFi ecosystem. Mariana also marks the first collaboration across Innovation Hub Centres; expect to see more in the future.”
A proof of concept delivery target date of mid-2023 has been set by BIS and working central banks. Due to the inherent price volatility of digital assets and the absence of a single regulatory framework, the financial institution had previously expressed skepticism about them.
However, the BIS has lauded some aspects of distributed ledger networks, such as their superiority in terms of technology to fiat money. Ninety percent of central banks globally are actively looking at the usefulness of CBDCs, according to a recent paper written by BIS.
