BASEL, Switzerland—The Bank for International Settlements (BIS) has released its final report on a pilot involving the use of wholesale central bank digital currencies (CBDCs) to settle cross-border and foreign exchange (FX) transactions.
Dubbed Project Mariana, the experiment leveraged blockchain and themes from decentralized finance to offer a solution. The joint study drew participation from the Monetary Authority of Singapore, Banque de France, and the Swiss National Bank, according to CoinGeek.
The report notes that one key theme of the study is automated money makers (AMM) allowing commercial banks to make international payments via bridges.
“Using AMMs in the design offers several benefits, including instant settlements of FX transactions and the possibility of accommodating several currencies on the platform,” CoinGeek explained.
Requirement Outlined
However, the report noted that pre-funding of liquidity will be required before AMMs can be deployed, a leap from what is obtainable in present FX markets, CoinGeek said.
“In its proposed design, central banks do not need to control the underlying platform but will rely on smart contracts that follow industry best practices,” CoinGeek reported. “To ensure greater resilience, the BIS notes in the reports that bridges allowing cross-border payments will be built with necessary guardrails to ensure both on-chain and off-chain resilience.”
Despite the promise shown by Project Mariana, the BIS noted that further studies should be carried out to ensure efficiency, CoinGeek stated, adding, the first area identified in the report was security, with the BIS noting the vulnerabilities associated with using blockchain and DeFi technology in finance.
‘Thorough Investigation Needed’
“Clearly, cyber attacks have repeatedly uncovered vulnerabilities of blockchain and DeFi technology, often with considerable damage to the parties involved,” the BIS report states. “Therefore, while tokenization and DeFi may have potential benefits, a thorough investigation of security questions is needed.”
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