The European Central Bank (ECB) is expanding its test of distributed ledger technology (DLT) that was initiated in April. The second phase of testing will involve an increased number of private financial institutions and three additional central banks.
In the new phase, a total of 48 financial institutions will participate. This includes divisions of major banks such as ABN AMRO, BNP Paribas, Bank of New York Mellon, HSBC, J.P. Morgan, and Société Générale. The participants for both sets of tests were chosen through a call for applicants issued in December.
The new group of participants will engage in tests involving wholesale domestic payments within the euro area, various securities-related use cases, and foreign exchange payment-versus-payment transactions among central banks. The latter two tests will involve live settlements using central bank money instead of commercial bank money.
The first wave of testing involved 14 participants, including private institutions and central banks. Some of these participants are also part of the second wave and focused on delivery-versus-payment settlement of transactions with government bonds. They used three interoperability solutions developed by different European central banks: Deutsche Bundesbank’s Trigger Solution, Banca d’Italia’s TIPS Hash-link, and Banque de France’s Full DLT Interoperability.
The tests primarily concentrate on the interaction between the interoperability of DLT transactions and the ECB’s existing TARGET settlement system. Payment-versus-payment and delivery-versus-payment are forms of real-time gross settlement.
The test results have broad applications and can be applied to both cash and tokenized securities. They could also be relevant for central bank digital currency (CBDC), with the French solution specifically designed for CBDC.
The continuation of Project Meridian will also test the same three interoperability systems. The Bank of England, along with the central banks of Belgium, Germany, France, Italy, Lithuania, the Netherlands, Spain, and the Hong Kong Monetary Authority, will be participating in this project.
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