Central banks test Curve AMM technologies for CBDCs

The BIS Innovation Hub, in collaboration with the central banks of France, Switzerland and Singapore, conducted tests of Curve v2 hybrid function automated market maker for operations in wholesale CBDC pools.

1/11 Project Mariana, a collaboration between the BIS Innovation Hub, Bank of France, Monetary Authority of Singapore, and Swiss National Bank, is exploring the use of @CurveFinance‘ Curve v2 HFMM for on-chain wholesale CBDC pools.

Truly a milestone for TradFi x DeFi innovation pic.twitter.com/IbUCLvxPmN

— knows ?? (@evmknows) June 28, 2023

The initiative is being carried out as part of Project Mariana. It marks an important milestone in the integration of TradFi and DeFi, participants noted.

“The choice fell on Curve v2 [and its HFMM] solely for experimental purposes. This does not reflect an endorsement of the protocol or any of its products,” the document states.

Liquidity pools and the bonding curve are integral parts of the proposed AMM design, the document says.

As part of the project, the parties examined issues related to credit and settlement risks, as well as functional compatibility in trading tokenized foreign currencies.

In the initiative, the AMM, token standards and bridges were tested. They are expected to underpin an international interbank market for foreign exchange using wholesale CBDCs on the blockchain. Participants stressed the need to develop technical specifications.

In the liquidity pool model, commercial banks form the pools — they act as customers for issuing and redeeming CBDCs, as well as their suppliers.

Central banks act as managers of wholesale national currencies’ issuance and as bridge operators. They also oversee “white lists” for platform access.

Project Mariana was launched in November 2022. A final report will be published by the end of this year.

In June, MAS presented a report summarising BIS’s work on Project Guardian. The initiative aims to study the alignment of tokenization and DeFi with international standards.

Earlier BIS experts described tokenization based on CBDCs as the future of the global financial system, and cryptocurrencies as a misguided branch of this process.