The European Central Bank (ECB) has announced an expansion of its initiative to facilitate the settlement of transactions recorded on distributed ledger technology (DLT) in central bank money, aiming to enhance financial market efficiency while maintaining security.
Two-Track Approach to Implementation
The ECB's Governing Council revealed on Monday that the initiative will follow a two-track approach. Initially, the Eurosystem will develop an interoperability link between DLT-based transactions and its existing TARGET Services platform. A timeline for implementation is yet to be confirmed.
In the longer term, the ECB will explore a fully integrated solution for DLT settlements, including international transactions such as foreign exchange settlements.
Commitment to Innovation and Stability Following ECB Expanded Initiative
“We are embracing innovation without compromising on safety and stability,” said ECB Executive Board member Piero Cipollone, who oversees the initiative. He emphasized that the plan aligns with the Eurosystem’s broader objective of harmonizing and integrating Europe’s financial ecosystem.
The ECB has committed to further research and engagement with both public and private stakeholders to ensure that its DLT integration efforts align with the evolving needs of the financial sector.
Building on Previous Trials and Experiments
The decision builds on prior exploratory work conducted between May and November 2024, during which 64 participants, including central banks, financial institutions, and DLT platform operators, carried out over 50 trials and experiments. Some trials involved real settlements in central bank money, while others tested simulated transactions.
By expanding its initiative, the ECB seeks to position the Eurosystem at the forefront of digital financial infrastructure. The effort is also in line with the Governing Council’s call to promote a digital capital markets union, as outlined in its March 2024 statement.
