European Central Bank Embraces Distributed Ledger Technology for Transaction Settlements
The European Central Bank has greenlit initiatives to utilize central bank money for settling transactions through distributed ledger technology, aiming for enhanced efficiency in its payment systems.
The European Central Bank (ECB) Governing Council has sanctioned research initiatives aimed at utilizing central bank money to settle transactions conducted via distributed ledger technology (DLT), which is part of a broader effort to enhance the efficiency of its payment mechanisms.
Key Points:
- The ECB’s Governing Council has approved two workstreams to incorporate central bank money within DLT transaction settlements.
- They are exploring ways to apply DLT technology to improve the efficiency of payment systems.
The ECB is focusing on creating methods to link DLT frameworks with Eurosystem TARGET services, ensuring the smooth flow of both cash and securities throughout Europe. A pilot initiative is slated to launch in the third quarter of 2026. A long-term plan known as “Appia” will facilitate global operations and evaluate solutions based on DLT.
“The decision is in line with the Eurosystem’s commitment to supporting innovation without compromising on safety and efficiency in financial market infrastructures,” stated a recent release.
The ECB has been examining how DLT can enhance payments settlement, a pursuit being investigated by central banks worldwide. Between May and November 2024, the ECB conducted thorough initial investigations into the settlement of wholesale central bank money. A subsequent report published on the same day detailed that DLT could provide advantages such as reduced costs and minimized credit and settlement risks.
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