European Central Bank (ECB) to Conduct Distributed Ledger Tech (DLT) Trials

The European Central Bank (ECB) is focused on carrying out DLT or distributed ledger technology trials, which are currently underway.

The Eurosystem is currently testing distributed ledger technology (DLT) for wholesale transactions in central bank money.

During these trials, 16 private firms as well as 5 reserve banks, including Oesterreichische Nationalbank, are participating in live experiments.

The trials reportedly involve tokenization, delivery-versus-payment (DvP) of government bonds, and various other innovative use cases including DvP transactions in primary markets and secondary markets, securities life cycle management, automated wholesale payments and payment versus payment transactions.

The main objective of these six-month trials is to gain insights into the interaction between the Target settlement system and DLT Platforms.

The Eurosystem actually began exploratory work on new technologies for settlement of wholesale transactions in central bank money on 13 May 2024, in a collaboration between financial firms and central banks.

The Governing Council of the ECB approved the participation of ten market participants (entities with access to TARGET) and six market distributed ledger technology (DLT) operators.

All had expressed their interest in participating in both trials with actual settlement “in central bank money and experiments with mock settlement in a test environment.

Several central banks from the euro area will also participate in the first wave of this exploratory work: Banque centrale du Luxembourg, Banque de France, Banca d’Italia, Deutsche Bundesbank and Oesterreichische Nationalbank.

These market participants and DLT operators participating in the exploratory work have “proposed several business cases for wholesale transactions recorded on DLT platforms with settlement in central bank money.”

The use cases mainly explore “the securities settlement cycle, such as delivery-versus-payment, secondary market transactions and lifecycle management of securities (e.g. coupon payments).”

Other use cases are also “under consideration – these are related to cross-border payments, such as payment-versus-payment.”

The list of participants in the first wave has already been finalized.

Financial market stakeholders interested in applying “can learn more about the Eurosystem’s exploratory work by viewing a recorded focus session.”

The Eurosystem assessed respondents’ eligibility to take part in the exploratory work and “the feasibility of proposals before the second wave of trials and experiments is initiated.”

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