With the help of JP Morgan’s Onyx, MAS and BdF simulated the first cross-border CBDC transaction to apply automated market making.
According to a press release from the Banque de France (BdF) yesterday, the BdF and the Monetary Authority of Singapore (MAS) completed a central bank digital currency (CBDC) experiment including cross-border wholesale payment and settlement.
A common network between France and Singapore was used to simulate cross-border transactions using multiple CBDCs (m-CBDCs). The experiment was supported by Onyx, JP Morgan’s blockchain-focused business unit, and was the first to improve efficiency through the use of liquidity management and automated market making capabilities.
Sopnendu Mohanty, MAS Chief FinTech Officer, said : ” The implementation of a multi-currency Shared Ledger infrastructure allows participants from all countries to transact directly in different currencies. This m-CBDC experiment broke with the past by decentralizing financial infrastructure, to improve liquidity management and market making services. »
An authorized blockchain, based on Quorum technology, was used to conduct cross-border transactions between a Singapore dollar CBDC and a Euro CBDC. The experiment aims to overcome barriers to traditional cross-border payments, such as settlement delays due to time shifts, limits on operating hours and lack of transparency around exchange rates.
Valérie Fasquelle, BdF’s director of infrastructure, innovation and payments, commented : ” By experimenting with the circulation of the euro CBDC in a network of shared corridors, Banque de France and MAS tested the possibility of providing a link with other CBDCs around the world. This is an opportunity to build arrangements for multiple CBDC models, improving cross-border payments and increasing harmonization of post trade procedures. »
The exchange rate between euros and Singapore dollars was automatically managed by smart contracts. Both countries have implemented blockchain nodes on public and private cloud infrastructures, illustrating the interoperability between different types of cloud infrastructures.
The design of the network meant that each central bank could govern its own CBDC distribution, while ensuring visibility. It also demonstrated that KYC procedures, contractual agreements, costs and the number of intermediaries could all be reduced.
This simulation was one of the final stages of the BdF wholesale experimentation program that will conclude later this year. Many other central and commercial banks could join the m-CBDC network because its design is scalable.