Moreover, the European Central Bank (ECB) is currently testing out temporary solutions to wholesale distributed ledger technology (DLT) settlement. They hope to have a final decision in the coming year. This latest exploration follows on a successful series of wholesale DLT settlement trials conducted last year. Those proceeding engaged 64 IOF members and cumulatively unlocked €1.6 billion in settlements.
A full report documenting the findings from last year’s wholesale DLT settlement trials is due out very soon. The Eurosystem will then conduct a detailed review of these findings to guide its strategic path.
The ECB is exploring a number of options to facilitate wholesale DLT settlement. One possible way forward is connecting existing multi-bank wholesale systems such as Fnality or Partior. Fnality and Partior are two representations of operational multi-bank platforms that have already gone live with facilitating wholesale transactions.
A second possible approach being explored is allowing tokenized deposits. At the moment the ECB considers single-bank tokenized deposits to be a second-best option for Europe. This view is based on the rather slow uptake of tokenized deposits across the continent.
The longer-term vision, dubbed Appia, is broadly expected to include a wholesale central bank digital currency (CBDC). In the meantime, the ECB is likely to build on Germany’s Trigger solution and soon, Italy’s Hashlink.
Meanwhile here in the United States, we’re increasing our own tokenization efforts. This announcement marks an important step in the growing global momentum around the promise of distributed ledger technology (DLT) for financial settlements. The ECB’s several-pronged approach illustrates the challenges and promise that this fast-growing technology poses.
