Second group of participants chosen to test DLT for settlement in central bank money

21 June 2024

[The first paragraph of this news item was updated on 26 June 2024 at 11:00 CET to correct a factual error and bring it into line with the linked PDF.]

Today, the Governing Council of the European Central Bank gave its approval for an additional group of participants to test distributed ledger technology (DLT) for the settlement of wholesale transactions in central bank money. In total, 49 private firms from the financial sector and three central banks will take part in the second wave of the Eurosystem’s exploratory work.

From July to November 2024, the group will explore specific use cases, joining a first group of participants who have already been testing since 13 May. This second wave will broaden the scope of the exploratory work and will cover (i) domestic payments within the euro area with mock settlement, (ii) a wide set of securities-related use cases with both real and mock settlement, and (iii) foreign exchange payment-versus-payment (PvP) transactions with other central banks with mock settlement. Meanwhile, nine participants from the first group will add further use cases and interoperability-type solutions.

The high number of participants shows that there is strong interest in how TARGET Services and DLT platforms could interact and in the benefits that such technologies could bring to the wholesale financial market.

The invitation to express interest in taking part in the Eurosystem’s exploratory work was launched in December 2023. The tests include trials with actual settlement in central bank money and experiments with mock settlement in a test environment. In May 2024, the first experiment was conducted successfully. It covered the simulated delivery-versus-payment (DvP) settlement of government bonds in a secondary market transaction against central bank money.

The three Eurosystem interoperability-type solutions will also be tested as part of Project Meridian FX. This project was launched by the Eurosystem and London centres of the Bank for International Settlements Innovation Hub, together with the Bank of England. Its aim is to develop a DLT-capable interoperability mechanism for foreign exchange transactions. The Bank of England will act as the foreign central bank for tests with the Eurosystem solutions.