Exploratory work on new technologies for wholesale central bank money settlement
Amid growing interest in potentially using distributed ledger technology (DLT) to settle wholesale financial transactions, the Eurosystem is currently exploring three interoperability-type solutions.
In its work on DLT settlement solutions, the Eurosystem aims (i) to consolidate and further develop the ongoing work of Eurosystem central banks in this area, (ii) to gain insights into how different solutions could facilitate interaction between TARGET Services and DLT platforms, and (iii) to meet market demand for central bank money solutions for the DLT Pilot Regime, which commenced in March 2023.
Financial market stakeholders were invited to take part in trials and experiments to explore new technologies for wholesale central bank money settlement. The trials involve transactions with actual settlement in central bank money, while the experiments involve mock settlement in a test environment. A total of 60 firms from the financial sector and four central banks are participating in this exploratory work.
A set of key performance indicators is being used to assess the results of the trials and experiments.
Use cases tested within the exploratory work (updated 24 October 2024)
| Experiments with mock settlement | Trials with actual settlement |
Primary issuance of bonds by financials and settlement with delivery-versus-payment, as well as: • Lifecycle management of securities, e.g. coupon payment and redemption • Secondary market transactions |
Primary issuance of bonds by financials, corporates and a sovereign, and settlement with delivery-versus-payment, as well as: • Lifecycle management of securities, e.g. coupon payment and redemption • Secondary market transactions |
Cross-currency payment-versus-payment transactions with another central bank |
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Interbank deposit token transfers with related settlement in central bank money |
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Automated wholesale payments |
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Margin calls |
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Overnight repurchase agreements |
Intraday repurchase agreements |
Settlement of payments related to interest rate swaps via smart contracts |
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Interbank reconciliation of bilateral accounts with settlement of outstanding balances in central bank money |
The Eurosystem makes central bank money (the safest and most liquid settlement asset) available in digital form for wholesale settlement via its TARGET Services. It is committed to continuing to provide central bank money settlement and support the settlement of wholesale transactions via market infrastructures that are fit for purpose.
For this reason, the Eurosystem closely monitors market developments in the field of market infrastructures involving the use of innovative technologies, such as DLT, for wholesale payments and securities settlement.
Keynote speech: Towards a digital capital markets union, Piero Cipollone, Member of the Executive Board of the ECB, at the Bundesbank Symposium on the Future of PaymentsNew Technologies for Wholesale settlement Contact Group
The New Technologies for Wholesale settlement Contact Group (NTW-CG) aims to support the Eurosystem’s exploratory work on wholesale central bank money settlement. This group provides expert input and keeps the Eurosystem up to date with advances in the use of distributed ledger technology and other new technologies in wholesale financial markets. The NTW-CG has no formal advisory or steering role with respect to the Eurosystem’s exploratory work.
• Terms of Reference for the NTW-CG
To ensure openness and broad representation, membership is subject to an annual review. Market participants are welcome to express their interest in joining the NTW-CG by submitting an application form and relevant documentation to the NTW-CG Secretariat by 15 May of each year at the latest.