The European Central Bank turns to DLT technology, claiming it will “improve financial market efficiency.”
The European Central Bank (ECB) has announced plans to implement a payment system based on DLT technology, allowing financial institutions to settle transactions using central bank money. According to Bloomberg, this initiative could be another step toward the introduction of a wholesale CBDC.
DLT, short for Distributed Ledger Technology, is a system for recording and sharing information among multiple participants in a network.
In a statement, Piero Cipollone, a member of the ECB’s Executive Board, said:
“This is an important contribution to enhancing European financial market efficiency through innovation. Our approach will pay due attention to the Eurosystem’s goal of achieving a more harmonized and integrated European financial ecosystem.”
The ECB’s project will be implemented in two distinct phases. The first phase aims to develop a platform connected to the existing Target settlement system. Target (Trans-European Automated Real-Time Gross Settlement Express Transfer) is a payment system that enables real-time money transfers between EU banks. It is the primary European platform for high-value payment settlements and is used by both central and commercial banks to process euro transactions.
In the next phase, the institution aims to establish “a more integrated and long-term solution” that will also include foreign currency transactions, although no specific timeline has been provided for its implementation.
The ECB’s initiative follows a similar path to that of the Swiss National Bank, which has already launched a pilot project for a wholesale CBDC. The Swiss project, introduced in December 2023, has enabled the settlement of various digital bonds and was recently extended until 2026.
