Last week Banco Central do Brasil announced its selection for its 2022 LIFT Lab that explores innovation. One of the eight projects chosen by the central bank is a DeFi initiative from Itaú, Latin America’s largest bank. The project will have liquidity pools of currencies such as the Brazilian real, U.S. dollar and others, enabling foreign exchange (FX).
The currencies will be tokenized, ’emulating’ stablecoins. The DeFi FX project is part of a broader platform for custody and alternative investments.
At least four of the eight LIFT Lab projects are blockchain related. The other three are:
The news comes just a month after Itaú announced it had tokenized its first digital asset, a trade finance receivable.
This Brazilian LIFT Lab is related to, but is separate from, the Real Digital Lift Challenge that focuses on central bank digital currency (CBDC). Itaú is also participating in that initiative in a joint project with the Brazilian stock exchange B3 and R3 for PvP for international payments.
Other central banks are also exploring DeFi, liquidity pools and automated market making (AMM), especially the Monetary Authority of Singapore (MAS). When MAS and the Banque de France conducted a cross border CBDC experiment, they worked with JP Morgan, which used an AMM for the forex transactions. MAS’s Project Dunbar Multi-CBDC project also has plans to experiment with AMMs for FX in the future. A key advantage of AMM for forex is it enables 24/7 trading.
Additionally, MAS has launched Project Guardian, a DeFi initiative using permissioned liquidity pools for trading tokenized bonds. JP Morgan is also a participant.
Image Copyright: casadaphoto / 123rf
AMMautomated market makingBanco Central do BrasilblockchainBrazilcentral bankDeFidistributed ledgerDLTItauItau Unibancoliquidity poolssmart contracts
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