The Eurosystem enters the era of wholesale settlement with DLT network: what does it mean for the banking industry?


Eurosystem Initiates Wholesale Settlement Testing for DLT Networks

The Eurosystem, which includes the European Central Bank among others, is preparing to conduct trials in wholesale settlements for DLT networks, i.e. Distributed Ledger Technology. These tests are set to involve the central bank’s money and cutting-edge technologies. The application call announced in December of this year has garnered significant interest, with the testing process itself scheduled to commence in May.

Presented Use Cases of JP Morgan’s Onyx Tool

During the latest sixth meeting of the industry contact group, several intriguing use cases were presented. One of them involved scenarios related to JP Morgan’s Onyx tool. By utilizing token deposits and deposit tokens, the significance of central bank tools for interbank settlements is emphasized. Proposals involving Central Bank Digital Currency (CBDC) are increasingly gaining attention.

Central Bank Utilization Proposals for Interbank Payments

At the industry contact group meeting, proposals from two firms were introduced: ABI Lab, in cooperation with the Italian Banking Association, and JP Morgan represented by Onyx. Both groups showcased methods for leveraging the central bank for interbank payments, indicating the growing interest of the banking sector in this direction.

Eurosystem’s Experiments

The Eurosystem plans to conduct experiments with three different solutions. These will include programs like Trigger from Germany, TIPS Hashlink from Italy, and wholesale CBDC from France. These projects aim to explore the potential of new technologies and central bank money for interbank settlements.

Asset managers such as AXA Investment Managers and Union Investment are highlighting the benefits of using central bank money for settlements, especially in bond trading. This serves as another argument for exploring the possibilities that new technologies bring to the financial sector.