Representatives from the French and Slovenian treasuries are among a newly announced rollcall of participants in the latest stage of a European initiative focused on distributed-ledger technology (DLT) and central bank money.

The ‘Pontes’ project is the latest stage of efforts by the Eurosystem – which comprises the European Central Bank (EBC) and the national central banks of the 20 European Union (EU) member states whose currency is the euro – to ‘provide a solution to the market for settling wholesale financial transactions in euro on market DLT platforms against central bank money.’

The European Central Bank (ECB) has in the past week announced the members of a ‘market contact group’ selected by the Eurosystem to ‘support and facilitate focused dialogue with the financial market’ as the initiative progresses (‘Eurosystem selects members for the Pontes market contact group’ – 10 October).

The group, which is chaired by ECB’s Market Infrastructure Division deputy head George Kalogeropoulos, comprises central banks, DLT platform operators and market participants (mainly banks), as well as one representative each from the French and Slovenian treasuries (respectively, Charles Martinet and Kristjan Dekleva). It is the first time central government reps have been directly involved.

France and Slovenia’s central banks are also represented in the group, along with the central banks of Austria, Belgium, Germany, Greece, Italy, Luxembourg, Netherlands and Spain, as well as the European Investment Bank (the long-term lending arm of the EU). All members were chosen following a call for expressions of interest launched in July.

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Testing during 2024

The whole exercise was effectively kicked off almost two-and-a-half years ago when (in April 2023) the Eurosystem announced planned activity to explore potential solutions for central bank money settlement of wholesale transactions recorded on DLT platforms.

The work was described as ‘part of the Eurosystem’s broader efforts to ensure that developments in central bank money keep pace with and contribute to digital innovation in wholesale and retail payments, and that central bank money remains a monetary anchor that supports the stability, integration and efficiency of the European financial system and payments system.’

Tests were conducted last year (2024) using three Eurosystem solutions – respectively developed by Deutsche Bundesbank, Banca d’Italia and Banque de France – enabling wholesale transactions recorded on DLT platforms to be settled in central bank money in the Eurosystem-operated T2 real-time gross settlement (RTGS) system.

This exploratory work, which involved more than 50 trials and experiments over two ‘waves’, came to an end in November 2024. More than 200 transactions took place, with a total value of €1.59 billion settled. 

‘The high level of interest in this initiative, with 64 eligible participants across nine jurisdictions settling almost €1.6bn in CeBM [central bank money], confirmed the market interest in DLT and the use of tokens,’ an ECB report noted. ‘Some of the financial stakeholders that took part have firm plans to develop and use DLT in wholesale financial markets.’

RELATED ARTICLE ECB confirms participants for trials using DLT for central bank money settlement – a news story (8 April 2024) on the first stage of explorations

Moving on with Pontes (and Appia)

Three-and-a-half months ago (1 July) the ECB announced that its Governing Council had approved the next steps for the explorations ‘in line with the Eurosystem’s commitment to supporting innovation without compromising on safety and efficiency in financial market infrastructures.’

A ‘two-track approach’ is now being followed. Pontes, which is the first track, aims to provide a ‘short-term offering to the market’ – including a pilot phase – and a second track, which has been called ‘Appia’, focuses on developing a potential ‘long-term solution.’

Pontes will offer a Eurosystem DLT-based solution, linking DLT platforms and TARGET Services to settle transactions in central bank money, the ECB said. (TARGET Services are financial market infrastructure services including T2 for settling payments, T2S for settling securities and TIPS for settling instant payments). 

Work gets underway this month (October), focusing initially on preparing for the pilot phase – slated to launch in the third quarter of 2026 – and, later on, ‘enhancements’. The aim is to offer a single Eurosystem solution that ‘incorporates features used’ in the 2024 exploratory work. The feasibility of ‘further enhancements in line with the TARGET Services operational, legal and technical standards’ will also be explored during the pilot. 

Appia focuses on developing a long-term approach for an ‘innovative and integrated ecosystem in Europe that also facilitates safe and efficient operations at the global level.’