The European Central Bank (ECB) is broadening its distributed ledger technology (DLT) test, which was first launched in April. This new phase of testing will explore fresh use cases with a surge of private financial institutions and three additional central banks.
A total of 48 financial institutions will be taking part in this new phase. This includes branches of some of the world’s largest banks, such as ABN AMRO, BNP Paribas, Bank of New York Mellon, HSBC, J.P. Morgan, and Société Générale. Participants in both testing phases were selected through a call for applicants that was issued in December.
The new group of participants will be involved in testing 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 rather than commercial bank money.
The initial phase of testing included 14 participants, including private institutions and central banks. Some of these are also taking part in the second phase, and they examined the delivery-versus-payment settlement of transactions with government bonds using 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 focus on the interaction between the interoperability of DLT transactions and the ECB’s existing TARGET settlement system, with a specific emphasis on payment-versus-payment and delivery-versus-payment settlement, which are forms of real-time gross settlement.
The tests are carried out using cash and tokenized securities, and they could also be applied to central bank digital currency (CBDC). Only the French solution was specifically designed for CBDC.
The same three interoperability systems will be tested as part of a continuation of Project Meridian, with the Bank of England and the central banks of Belgium, Germany, France, Italy, Lithuania, the Netherlands, Spain, and the Hong Kong Monetary Authority also participating in that project.
Major banks quickly experiment with ECBs wholesale distributed ledger technology