BNP Paribas participated in Eurosystem trials of wholesale settlement DLT solution
Eurosystem accelerates innovation and experiments wholesale settlement solutions for DLT transactions with BNP Paribas.
BNP Paribas claims that it is at the forefront of financial innovation, testing all three solutions in the Eurosystem’s wholesale digital settlement trials.
By engaging in real and test transactions with Banque de France, Deutsche Bundesbank, and Banca d’Italia, the Bank “utilized its Neobonds and AssetFoundry platforms to push the boundaries of digital asset technology.”
This initiative is set to deepen insights into the interaction between Eurosystem payment infrastructures and market DLT platforms, playing a crucial role in “modernizing European markets, developing the economy and bolstering financial stability.”
This year, the Eurosystem, comprising the European Central Bank (ECB) and national central banks, has been exploring the benefits of “digital asset (tokenized financial instruments) and cash settlement on distributed ledger technology (DLT) along with market participants.”
The program explored three payment solutions – full DLT interoperability solution “from Banque de France, Trigger Solution from Deutsche Bundesbank and TIPS Hash-Link from Banca d’Italia.”
Digital assets represent a transformative technological advancement and open new “perspectives for capital markets.”
Tokenized financial instruments can be traded and settled more efficiently, offering programmability, “transparency, and instant settlement on the blockchain.”
As part of this experimentation program, BNP Paribas tested the three available solutions via ten use cases, “conducting real transactions with Neobonds, BNP Paribas’ private tokenization platform leveraging Canton blockchain, and test transactions with AssetFoundry, its Ethereum-based platform.”
It also performed tests with external DLT platforms.
BNP Paribas was market DLT participant and market DLT operator, leveraging its integrated and diversified model “across business lines, including ALM Treasury, BNP Paribas Asset Management, FIC Official Institutions Coverage/FIC Investors Coverage, Global Markets, and Securities Services, to build expertise across multiple roles, along with other market participants, both issuers and investors.”
As part of the program BNP Paribas arranged and placed the first Eurozone sovereign digital bond for the Republic of Slovenia “as DLT market operator on the NeobondsTM platform.”
This EUR30 million issuance was followed by “secondary market activity with investors AXA IM – on behalf of AXA France, Banque de France and the European Investment Bank (EIB).”
Marjan Divjak, Director General of the Treasury Directorate, Slovenia’s Ministry of Finance, notes:
“While the current value issued and traded remains modest, we anticipate distributed ledger technology will play an increasingly pivotal role in financial markets in the coming years.”
Emmanuelle Assouan, Director General of Financial Stability and Operations, Banque de France, adds:
“I am thrilled by the success of this first operation, where the Banque de France stepped in as an investor in the secondary market for tokenized debt.”
BNP Paribas was joint lead “manager of the European Investment Bank’s EUR100 million 3-year euro digital bond issuance.”
The bond was registered and settled on HSBC’s ORION platform. Similarly, Caisse des Dépôts issued its first digitally native notes “on Euroclear’s tokenization platform (D-FMI) where BNP Paribas acted as issuing and paying agent.”
Cyril Rousseau, Director General of Finance, European Investment Bank, states:
“We believe that digital technologies can play a key role in strengthening Europe’s financial infrastructure and advancing the digital transition.”
Additionally, BNP Paribas participated in a trial for the subscription of tokenized fund shares “managing the wallets and cash flows of the investor and fund house.”
BNP Paribas tested Deutsche Bundesbank’s Trigger Solution for the cash settlement of a BNP Paribas bond, issued and “settled on the Neobonds tokenization platform as market DLT operator.”
Issuance was followed by secondary market transactions. In addition, an experiment was also performed “using the AssetFoundryTM tokenization platform.”
According to Julian Reischle, Director General Payments and Settlement Systems, Deutsche Bundesbank:
“The Eurosystem exploratory work has been a great success thanks to the huge collaborative efforts of all involved parties when testing the three available technical solutions.”
Successful exploration of Banca d’Italia’s TIPS Hash-Link Solution
BNP Paribas conducted “thorough testing” of Banca d’Italia’s Hash-Link solution with the “issuance and settlement of a simulated bond.”
This solution relies on a dedicated instance of TARGET Instant Payment Settlement (TIPS) and on “an API-based lightweight protocol (Hash Link); all its functionalities were explored with success.”