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.

Bio: Alexander Lipton is Co-Founder of Sila, Global Head of Research and Development at Abu Dhabi Investment Authority, Visiting Professor and Dean’s Fellow at HUJI, and Connection Science Fellow at MIT. Alex is an advisor to several fintech companies worldwide. Previously, he was Co-Head of the Global Quantitative Group at Bank of America. Earlier, he was a senior manager at Citadel, Credit Suisse, Deutsche Bank, and Bankers Trust. In parallel, Alex held visiting professorships at EPFL, NYU, Oxford, and Imperial College. Before becoming a banker, Alex was a Full Professor of Mathematics at the University of Illinois and a Consultant at Los Alamos. In 2000 Alex received the Inaugural Quant of the Year Award and in 2021 the Buy-side Quant of the Year Award by Risk Magazine. Alex authored/edited 11 books and more than a hundred scientific papers on topics stretching from thermonuclear fusion and astrophysics to monetary circuits. Alex is an Associate Editor of several journals and a frequent keynote speaker at international conferences.