Project Mariana is a step towards widespread adoption of cryptocurrencies by major financial institutions.
Decentralized finance (DeFi) has the potential to become a major part of the financial ecosystem. Central banks around the world are beginning to understanding the impact of decentralized technology could have on cross-border payments and have started working accordingly.
This week, JP Morgan held its first DeFi operation with the Central Bank of Singapore, in which they have been carried out foreign exchange transactions and government bonds, in the form of tokenized deposits, on the Polygon network. These transactions with tokenized assets have been able to be settled instantly, which frees up management costs and time.
The operation is part of Project Guardian which aims to explore the economic potential and the use cases of asset tokenization within the financial industry.
The Bank for International Settlements and the Mariana Project
In this DeFi adoption trend, the Bank for International Settlements (BIS) is working on Project Mariana, which investigates the use of Automated Market Makers (MAA) to automate foreign exchange markets and settlement, with the aim of improving cross-border payments.
The Mariana Project has three main objectives:
- Explore the design and application of AMMs for CBDC trading.
- Investigate whether a supranational network could become an efficient and trusted hub for cross-border settlement.
- investigate the governance models of CBDCs within the network.
AMMs are a type of smart contract that uses liquidity pools to automatically transfer digital assets, as opposed to the traditional processes of matching buyers and sellers, seeking consent for each transaction.
In short, AMMs pool liquidity using algorithms to determine prices between two or more tokenized assetsIn this way, Project Mariana aims to build the foundation for creating new financial infrastructures that facilitate the cross-border exchange of CBDCs.
The project seeks to address one of the main G20 concerns, such as speeding up cross-border payments, reducing their costs and making them more transparent.
The BIS has launched this project among the innovation centers it has spread across France, Switzerland and Singapore.
At the moment, the project is based on a pilot program for the international transfer of CBDCs based on Swiss francs, euros and Singapore dollars, between financial institutions to settle foreign exchange transactions in financial markets.
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