Eurosystem seeks participants for blockchain-based payment with central bank money

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The Eurosystem plans to proceed with a study to explore new solutions for wholesale central bank money settlement for seamless interbank transfers across the region.

In a formal disclosure, the Eurosystem urged financial market stakeholders to indicate their interest in participating in the planned trials using central bank money settlements. The study will involve central bank money being deployed in mock settlements before proceeding to real-world use cases.

Since April, the Eurosystem has been juggling the idea of a solution for settlements with central bank money, proceeding with the launch of a public consultation in October to gauge the opinion of stakeholders.

The incoming trials will involve blockchain as a base layer, primarily aiming to use central bank money for delivery versus payment (DvP) transactions. To cover the field, the studies will delve into three existing solutions: Italy’s TIPS Hash link, France’s Full-DLT interoperability, and Germany’s trigger solution.

While the three solutions have varying differences, the studies will seek common ground by leaning on the strengths of the distinct solutions.

The Eurosystem, comprising the European Central Bank (ECB) and the National Central Bank (NCB) of 20 eurozone member states, notes that the trials will involve a range of financial institutions not limited to commercial banks.

In accordance with the statement, potential participants in the Eurosystem include qualifying central securities depositories, licensed blockchain firms, and financial institutions with access to TARGET, the Eurosystem’s real-time gross settlement (RTGS) system. The pilot, which will have two phases, is expected to run for the greater part of 2024, with interested participants urged to forward their applications to the national central banks.

“Financial market stakeholders interested in participating in the trials and/or experiments between May 2024 and November 2024 are invited to respond to the relevant national central banks by 31 January 2024,” read the announcement. “Those wishing to join trials and/or experiments between July 2024 and November 2024 should respond by 30 April 2024.”

Laying the groundwork for a wholesale digital euro

Alongside the development of a retail digital euro, the ECB is testing the waters for a wholesale iteration in consultation with key stakeholders. As per a recent report, the ECB will proceed with research and trials in its attempts at a digital euro, focusing on its safety, resilience, and settlement performance.

The ECB will give prominence to the interoperability features of the wholesale digital euro offering, with pundits predicting tokenization use cases. Before throwing its weight behind pilots, the ECB is seeking clarity over the demand for instant settlement versus atomic payment. This key metric will decide the direction of its CBDC ambitions.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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