The European Central Bank wants its centralized financial settlement systems to better interact with distributed ledger technology (DLT) to keep up with technological developments in the financial markets.
The ECB is currently considering whether to issue a retail central bank digital currency (CBDC) for use by ordinary traders and citizens – but it also wants to be able to interact with innovations in wholesale financial markets, including those using the technology, underlying the cryptocurrency.
The central banks using the euro currency, collectively known as the Eurosystem, are to “investigate how wholesale financial transactions recorded on DLT platforms could be settled in central bank money,” the ECB said in a statement on Friday. The ECB is convening an industry group to help, it said.
The announcement reflects growing interest in the technology behind traditional financial markets, including the post-trade infrastructure that executes trades executed on trading venues. Euroclear, a Brussels-based firm specializing in clearing and settlement, is set to launch a new platform for DLT-based bond trading soon, and Forge, the crypto arm of French bank Societe Generale, has launched stablecoin CoinVertible (EURCV ) introduced. pegged to the euro to settle digital assets.
Speaking to the European Parliament’s Committee on Economic and Monetary Affairs on Monday, ECB Executive Board member Fabio Panetta said that “the effort to make Europe’s payments and financial system more competitive needs to work on several fronts,” not just the digital euro for private customers.
“We already have a wholesale CBDC — a digital infrastructure that allows banks to make interbank payments,” Panetta said, citing the ECB’s system known as TARGET2. “We are now examining whether the technology we are using, the centralized technology operated by the Eurosystem, needs to be updated to be more easily interoperable with intermediaries who may be adopting distributed ledger technology.”
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