Central Bank Digital Currencies [CBDCs] have emerged as a significant advancement in the realm of financial technology. This has led countries worldwide to engage in a competitive pursuit of developing their own CBDCs. In November 2022, a notable milestone was reached. France, Singapore, and Switzerland initiated a collaborative experiment, marking the first-ever cross-regional trial of its kind. Today, The Bank for International Settlements [BIS] and the participating nations jointly confirmed the successful completion of cross-border wholesale CBDC [wCBDC] trading tests.
“Project Mariana” was conceived by the Banque de France, the Monetary Authority of Singapore, and the Swiss National Bank. They were operating within the framework of the BIS. It involved experimenting with cross-border trade and settlement of simulated euro, Singapore dollar, and Swiss franc CBDCs among fictitious financial institutions. Cecilia Skingsley, Head of the BIS Innovation Hub said,
“Project Mariana pioneers the use of novel technology for interbank foreign exchange markets. It successfully demonstrated that it is feasible to exchange wholesale CBDC across borders using novel concepts such as automated market makers [AMM].”
DeFi played an important role in its CBDC testing
The aforementioned experiments employed decentralized finance [DeFi] technology principles on a public blockchain. The project utilized smart contracts to empower central banks. This was in order to oversee their wCBDC without the necessity of directly overseeing or governing the foundational platform. The report further read,
“DeFi (decentralized finance) elements tested in the project, specifically automated market makers, could form the basis for a new generation of financial market infrastructures.”
Nevertheless, the BIS confirmed that Project Mariana is solely a test phase. The report noted that it should not be construed as an intention by any of the collaborating central banks to introduce CBDCs or endorse DeFi or any specific technological solution.
Additionally, the primary motivation for numerous central banks to introduce CBDCs stems from the increasing digitization of global economies. As cash utilization diminishes, central banks face the potential loss of control over monetary policy and payment systems. Therefore, it is pertinent to necessitate the existence of a digital currency alternative.