ECB enlists several firms to test DLT using central bank money

credit: Shutterstock
credit: Shutterstock

The European Central Bank (ECB) has invited several companies to create use cases for the transaction process of central bank money on distributed ledger technology (DLT). 

The ECB has invited 10 market participants, with six DLT-based operators and five central banks also involved in producing tests to settle wholesale transactions of central bank money in a bid to test the waters of the emerging technologies capabilities when it comes to the speed of transactions. 

One of the invited parties, Clearstream, confirmed its involvement in the project and stated that it aims to “assess the feasibility of using DLT for wholesale transaction processing, using tokenised securities”. 

The ECB is intending to create use cases that focus on the securities settlement process, through transactions such as delivery-versus-payment, lifecycle management and secondary market transactions. 

One of the main key areas the ECB is aiming to address by tapping into DLT is to improve the speed of cross-border transactions across the EU, which has a tendency to create friction between transactions. 

Clearstream has revealed that it will bring its digital post-trade platform D7, which has enhanced DLT capabilities tokenised securities. 

Jens Hachmeister, Head of Issuer Services and New Digital Markets at Clearstream, said: “Clearstream’s participation in the ECB trials is a significant milestone in our digitisation journey: we are expanding our D7 digital securities infrastructure with DLT components and fostering connections with the main digital payment solutions across the Eurosystem. 

“We are thrilled to further collectively shape the future of an inter-connected digital European settlement landscape together with the ECB and our broad participant base. Of course, Clearstream will leverage the trial insights to further enhance D7 for the industry.”

The preparatory trials will commence between May and November 2024 and will connect with other central bank digital offerings, like Bundesbank’s Trigger Solution, Banca d’Italia’s TIPS Hash-link and the Full DLT Interoperability capabilities of Banque de France

This is the latest exploration of DLT and blockchain technology from the ECB after it announced it was in the preparation phase of the development of its digital euro central bank digital currency (CBDC). 

The preparation commenced 1 November 2023 and will last over two years as the ECB and the Eurosystem map out design elements for the digital euro, as well as establishing a rulebook for it to be widely accessible for all consumers and businesses within the EU.

Furthermore, Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), spoke to the European Parliament last February detailing the potential need for a digital euro as a third form of currency to sit alongside fiat. 

He said: “Let me assure you that the ECB’s Governing Council will not take any decision about the issuance of a digital euro until the legislative act has been adopted. 

“This constitutes the framework within which the digital euro will be established as legal tender. We will of course remain fully accountable at all times and will keep you continuously and closely informed about the Eurosystem’s progress towards a digital euro, not just at this stage but also after the legislative deliberations have concluded.”