It seems that the CBDC programs around the world continue these days. Check out the latest reports about one new move here.
CBDCs experiment completed
Recently, the Bank for International Settlements (BIS) collaborated with the central banks of France, Singapore, and Switzerland to conduct a successful cross-border trading experiment.
This experiment involved the use of central bank digital currencies (CBDCs) and decentralized finance (DeFi) technology.
The focus was on testing the efficiency of cross-border trading and settlement of “wholesale” CBDCs (wCBDCs) between simulated financial institutions.
According to a BIS press release, wCBDCs are mainly used by banks for the settlement of wholesale payments, while retail CBDCs are designed for public use in making payments.
To facilitate the exchange between the currencies, the experiment, dubbed “Project Mariana,” used hypothetical euro, Singapore dollar, and Swiss franc wCBDCs, as well as a common technical token standard provided by a public blockchain.
The use of bridges and an automated market maker (AMM) were key components of Project Mariana, according to the BIS.
The AMM utilized advanced algorithms to combine the liquidity of hypothetical euro, Singapore dollar, and Swiss franc wCBDCs, allowing spot FX transactions to be automatically priced, executed, and settled.
The BIS suggests that such protocols could be used by future financial market infrastructures to facilitate cross-border trading and settlement between financial institutions.
However, it is important to note that Project Mariana was purely experimental, and the involvement of various countries does not necessarily indicate any concrete plans to issue wCBDCs or use DeFi technology.
CBDCs in the news
Back in September, we revealed the fact that Agustín Carstens delivered a speech stressing the responsibility of central banks to establish a robust legal framework for CBDCs that prioritizes legitimacy, privacy, integrity, and user choice.
Carstens believes that it’s time to progress from the current system of using cash and commercial bank money since its effectiveness has been declining.
With people’s increasing demand for digital and programmable forms of money, the use of cash has decreased.
Additionally, advancements in digital services have exposed the drawbacks of existing systems and have raised expectations on what money should be able to do. To tackle these problems, CBDCs are viewed as a promising solution for improvement.
