SEM217: Alex Lipton, Abu Dhabi Investment Authority: Forex Trading Utilizing Blockchains

Tuesday, September 20th @ 11:00-12:30 PM (ONLINE)

We argue that decentralized finance (DeFi) can be used to reorganize forex trading and market-making. Specifically, we show that an automated market-making (AMM) cross-settlement mechanism for digital assets on interoperable blockchains, handling central bank digital currencies (CBDCs) and stable coins, is a promising venue. We develop an innovative approach for generating fair exchange rates for on-chain assets consistent with traditional off-chain markets. Finally, we illustrate the efficacy of our approach on realized FX rates for G-10 currencies.