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ECB expands initiative for settling DLT transactions in central bank money
This move is part of a broader strategy to modernise financial market infrastructure while maintaining the safety and efficiency of existing systems.
The European Central Bank( ECB) is expanding its efforts to enable the settlement of transactions recorded on distributed ledger technology( DLT) using central bank money. The initiative will follow a two-phase approach. In the short term, the ECB plans to develop a system that allows DLT-based transactions to be settled in central bank money through an interoperability link with current financial infrastructure in TARGET services. This will provide a way to integrate new technology into existing settlement systems without disrupting market stability. A specific timeline for implementation will be announced at a later stage. In the long run, the ECB will explore a more comprehensive solution that integrates DLT-based transactions directly into central bank money settlement systems. This approach will also take into account international financial activities, including foreign exchange settlements, to ensure that cross-border transactions can be conducted efficiently.“ We are embracing innovation without compromising on safety and stability,” said Piero Cipollone, ECB executive board member, who overlooks the initiative.“ This is an important contribution to enhancing European financial market efficiency through innovation. Our approach will pay due attention to the Eurosystem’ s goal of achieving a more harmonised and integrated European financial ecosystem.” The ECB has emphasised the importance of balancing technological innovation with financial stability. While DLT presents opportunities to improve market efficiency, any changes to settlement systems must align with broader efforts to maintain the reliability of the eurozone’ s financial infrastructure. On LinkedIn, Benjamin Duve, global head of partnerships, GK8 by Galaxy, said:“ Absolutely remarkable news out of Europe and the European Central Bank as the governing council has decided to provide central bank money for DLT rails or( not 100 % correct) wholesale CBDC … After his speech last fall Piero Cipollone set the tone for a bold vision on the
Digital Capital Market Union with considerations for DLT based capital markets and the role of new forms of central bank money, the choice has been made for the fastest possible first step to get there.” This development builds on previous work conducted between May and November 2024, during which 64 participants – including central banks, financial institutions, and DLT platform operators – were involved in over 50 trials and experiments. Some of these trials involved real settlement transactions in central bank money, while others were simulations designed to test the feasibility of various models. The results from these trials will shape the ECB’ s next steps in developing a more robust framework for DLT-based settlements.
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