Automated Market-Making for Fiat Currencies

16 Pages Posted: 11 Oct 2021

See all articles by Alex Lipton

Alex Lipton

Hebrew University of Jerusalem; Massachusetts Institute of Technology (MIT)

Artur Sepp

Sygnum Bank's Asset Management

Date Written: September 18, 2021

Abstract

We present an automated market-making (AMM) cross-settlement mechanism for digital assets on inter-operable blockchains, focusing on central bank digital currencies (CBDCs) and stable coins. We develop an innovative approach for generating fair exchange rates for on-chain assets consistent with traditional off-chain markets. We illustrate the efficacy of our approach on realized FX rates for G-10 currencies.

Keywords: Cryptocurrencies, Automated Market Making, Decentralized Finance, Blockchain, Decentralized Exchanges, Central Bank Digital Currencies

JEL Classification: G14, G19

Suggested Citation

Lipton, Alex and Sepp, Artur, Automated Market-Making for Fiat Currencies (September 18, 2021). Available at SSRN: https://ssrn.com/abstract=3939695 or http://dx.doi.org/10.2139/ssrn.3939695

Alex Lipton

Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem, Jerusalem 91905
Israel

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Artur Sepp (Contact Author)

Sygnum Bank's Asset Management ( email )

Uetlibergstrasse 134a
Zurich, 8045
Switzerland

HOME PAGE: http://artursepp.com

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