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French Central Bank Backs CBDC As Key To New Global Monetary System

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In a significant move that underscores the evolving landscape of digital currencies, representatives of Banque de France, the country’s central bank, have thrown their weight behind the central bank digital currency (CBDC) discourse. In a recent announcement, Denis Beau, the first deputy governor of Banque de France, hailed CBDC as the linchpin for ushering in a novel international monetary system.

According to a recent report, Beau’s endorsement came during a pivotal moment on October 3 when he asserted that CBDCs could be the catalyst for revolutionizing cross-border payments and reshaping the global financial order. Unlike many who view CBDCs as an afterthought in the cross-border arena, Beau emphasizes their strategic importance from the outset.

Pioneering CBDC Development Paths Unveiled

The deputy governor laid out two paths for Central Bank digital currency development. The first path entails establishing common standards and fostering interoperability between wholesale CBDCs and traditional financial systems. The second path, actively advocated by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS), revolves around creating regional or global central bank digital currency platforms. These platforms would enable the direct exchange of standardized wholesale CBDCs while facilitating payment versus payment and delivery versus payment transactions.

One noteworthy highlight in Beau’s address was his reference to Project Mariana. This collaborative initiative, involving Banque de France, the Monetary Authority of Singapore, and the Swiss National Bank, delved into the potential of an automated market maker (AMM). The project, which concluded successfully in late September, could hold key insights for the future of central bank digital currency

In a broader context, Beau extended his thoughts beyond central bank digital currency, touching on the tokenization of finance. He ardently believes that the public sector must actively support the private sector to unlock blockchain’s full potential while managing associated risks. He believes tokenized “central bank money availability” and tokenized assets should be seen as allies rather than rivals in the evolving financial landscape.

Banque de France’s enthusiastic embrace of central bank digital currency as a cornerstone of a fresh global monetary system signals a significant shift in the central bank’s approach. As discussions around CBDCs continue gaining momentum worldwide, the world eagerly watches how other central banks respond to this emerging financial paradigm.

Related Reading: |CBDC Battle Royale: Congress Divided Over Digital Currency

Ripple Reveals The “Secret Sauce” Behind Its New Uniswap-Rivalling DeFi Feature

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Ripple’s upcoming project is creating an Uniswap-rivalling Automated Market Maker [AMM] on the XRPL network. Dubbed the 0030 XLS-30d, as per a Github release, the proposal seeks to add AMM, which is touted to bring enormous DeFi potential to the blockchain. Typically, a market maker helps provide liquidity for trading pairs on centralized exchanges. 

However, DEXs do not support additional intermediate processes [order matching systems or custodial infrastructures]. Instead, these are replaced by autonomous protocols like AMMs, where users can initiate trades directly from non-custodial wallets. These protocols use smart contracts to define the price of digital assets and provide liquidity and are known as Liquidity Pools. Examples of AMMs include Uniswap, Balancer, and Curve.

As for AMMs, any entity can become a liquidity provider as long as it meets the requirements encoded into the smart contract. To ensure the ratio of assets in liquidity pools remains balanced and to eliminate price discrepancies of pooled assets, AMMs use preset mathematical equations. Uniswap and many other DeFi exchange protocols use a simple x*y=k equation. Where x represents the value of asset A, y denotes the value of asset B, and k is a constant.

During large orders in AMMs, a large number of tokens are removed or added to a pool, creating huge discrepancies between the asset’s price in the pool and its market price, thus providing an arbitrage opportunity. Here, the price difference allows a trader to buy and sell an asset in different markets to generate a profit.

Ripple’s team, however, noted that arbitrageurs generally wait for their profit to be more than the trading fees they would incur, which the former say reduces liquidity and slows down price discovery.

The Special Factor That Would Set Ripple Apart

In order to increase liquidity and pool-supplier profits while allowing arbitrage to remain profitable, Ripple is considering geometric mean market makers [GM3] as a native XRPL feature.

According to the Github discussions, they are working on a function that would continuously auction off zero-fee trading slots for arbitrageurs and give these earnings to liquidity providers, speeding up arbitrage because “there is no trading fee eating up potent profits.”

Proclaiming that XRPL AMM would be a ‘liquidity monster’, the expert stated that the proposal is still under discussion and needs to be first tested and voted through.

Binance Dives Into DeFi With Launch Of Automated Market Maker Pool

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Touted as the world’s largest cryptocurrency exchange, Binance made its way to the top with consecutive developments for the exchange as well as the ecosystem. The last two years have been eventful for the exchange following an array of partnerships across the globe. While global expansion has been one of Binance’s major missions, it hasn’t lost focus on the upgrades pertaining to the platform. Recently, the Malta-based exchange announced the launch of a new trading platform, Binance Liquid Swap.

Binance Steers Towards DeFi

Off late, Decentralized Finance [DeFi] has been the talk of the crypto town. While several platforms have been exploring the prospects of the DeFi space, Binance seems to have jumped on to the bandwagon. In a recent blog post, the exchange revealed that it had launched an automated market maker [AMM] pool, Binance Liquid Swap. This would permit users who provide liquidity to earn both income as well as interest via trading fees. However, unlike DeFi, Binance’s latest venture, is reportedly centralized.

The Malta-based crypto exchange claims to be the first to roll out a centralized exchange with AMM. The post further read,

“When you place your crypto funds into the liquidity pools on Binance Liquid Swap, you get to harness the power of an AMM pricing module. This can give you stable prices and lower fees for transactions both small and large, which are done via instant swaps.”

Currently, the platform supports just three coins, stablecoin Tether [USDT], Binance USD [BUSD] as well as Dai [DAI].  The liquid trading pairs available were USDT/BUSD. BUSD/DAI and USDT/DAI.

Furthermore, Binance affirmed that the prices and the transaction fees pertaining to the Binance Liquid Swap was entirely dependent on the assets in the liquidity pool. When a user adds, removes, or swaps funds present in the pool, the fees as well as the price changes. The exchange added,

“You’re entitled to your interest plus a cut of the transaction fees when you pool your tokens.”

Since the latest platform is still in its promotional period till 4 October 2020, the trading fee will be as low as 0.04 % However, it would soon return to 0.1% after the aforementioned date.