ECB to pilot blockchain-based euro settlement system by 2026

The European Central Bank (ECB) has approved a two-track plan to settle distributed ledger technology (DLT) transactions using central bank money, which could pave the way to modernize Europe’s financial system.

The first track, dubbed “Pontes,” will focus on a short-term solution by linking blockchain-based DLT platforms with “TARGET” Services, a suite of financial services developed and operated by the Eurosystem designed to facilitate the flow of payments and securities within the eurozone.

A pilot for Pontes is expected to launch by the end of the third quarter of 2026, the ECB said Tuesday. This pilot will use insights from the ECB’s exploratory DLT trials in 2024, which involved over 50 experiments and 64 participants, to test a unified settlement system in central bank money.

“The decision is in line with the Eurosystem’s commitment to supporting innovation without compromising on safety and efficiency in financial market infrastructures,” the ECB wrote.

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Second track takes long-term approach

The second track, called Appia, takes a longer-term approach, aiming to develop an “integrated ecosystem in Europe that also facilitates safe and efficient operations at the global level.”

Appia will see the ECB continue to study DLT applications in wholesale central bank settlements while working closely with public and private partners.

The Eurosystem will also set up market contact groups for both Pontes and Appia to maintain dialogue with industry stakeholders and gather feedback. A call for expressions of interest to join the Pontes group will be published soon.

The plan comes as central banks worldwide explore how blockchain can streamline settlements while maintaining control over money flows.

In 2023, a Bank of England experiment, conducted through the BIS London innovation hub, successfully tested using DLT to run large-scale interbank transactions. It demonstrated a prototype that could speed up and lower the costs of real-time gross settlement (RTGS) systems by linking them with other financial infrastructures and ledgers.

Cointelegraph reached out to the ECB for comment but had not received a response by publication.

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DLT trials reveal demand for central bank money

The ECB also published a report detailing the results of its recent DLT exploratory work. The report confirmed strong market demand for settling tokenized assets in central bank money, with 1.6 billion euros ($1.88 billion) settled during trials involving 64 participants across Europe.

Experimental use cases for payment and settlement methods using Trigger Solution, TIPS Hash-Link, and Full DLT Interoperability. Source: ECBThe findings show DLT could reduce “fragmentation, complexity and technological inefficiencies” in capital markets by enabling atomic, programmable settlement.

However, it pointed out the need for standardization, harmonized legal frameworks, and “an interoperability link with TARGET Services as soon as feasible.”

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