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France Tests CBDC Flows With Singapore Using Automated Liquidity Pool

Running on JPMorgan’s Onyx blockchain, it was the first cross-border CBDC transaction to use automated-market-making smart contracts.

Jul 8, 2021 at 11:16 a.m. UTC
Updated Sep 14, 2021 at 1:22 p.m. UTC

The Banque de France (BdF) has tested a cross-border central bank digital currency (CBDC) transaction with Singapore, marking the first use of a smart contract–based, automated liquidity pool for the digital EUR/SGD currency pair.

The French central bank worked with the Monetary Authority of Singapore for the experiment, one of the last in the bank’s wholesale CBDC sandbox program that finishes this autumn. It was executed using a permissioned version of Ethereum called Quorum, developed by JPMorgan.

In the context of wholesale – or bank-to-bank – CBDC transactions, cross-border payments without slow and costly intermediation is something of a Holy Grail. Cutting down on middlemen lessened the number of contractual arrangements and the Know Your Customer burden, Banque de France said.

JPMorgan’s blockchain-based Onyx suite of applications, which includes JPM coin, uses a system of automated digital contracts of the sort that have made areas like decentralized finance (DeFi) explode in the public arena. 

The CBDC automated liquidity pool and market-making service for EUR/SGD currency pairs could be scaled up to support the participation of multiple central banks and commercial banks in different jurisdictions, BdF said. The use of smart contracts automatically managed the EUR/SGD exchange rate in line with real-time market transactions and demands, it said.

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