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The European Central Bank (ECB) has launched Pontes, a new settlement solution designed to enable wholesale transactions in tokenised financial assets to be settled using central bank money.
The initiative marks another step in the Eurosystem’s efforts to integrate distributed ledger technology (DLT) into Europe’s financial market infrastructure while maintaining the role of central bank money in digital asset settlement.
Pontes connects DLT platforms to central bank settlement
Pontes builds on the findings of the Eurosystem’s 2024 experiments on using DLT for central bank money settlement.
The platform will operate as a bridge between distributed ledgers and the Target settlement service, initially providing a core set of settlement services that will be expanded as market requirements and technology evolve.
The Eurosystem plans to introduce enhanced functionality and longer operating hours progressively, with full implementation of the solution expected by 2028.
ECB President Christine Lagarde said the initiative forms part of efforts to develop a more integrated and resilient European financial market as financial services become increasingly digital.
“The Eurosystem is working to enable a more integrated, innovative and resilient European financial market in the digital age. We will continue to make progress in close collaboration with the market.”
An initial group of market participants and DLT operators has completed the onboarding process and is ready to begin using Pontes. Additional participants are expected to connect to the platform in the coming months.
ECB prepares to invest in tokenised securities
Alongside the launch of Pontes, the ECB has begun preparatory work to invest a small portion of its own funds in tokenised securities.
The initiative is intended to give the central bank first-hand experience of how blockchain technology is being applied in financial markets.
The initial investments will focus on euro-denominated securities issued by euro area public sector entities and European supranational institutions.
The experience is expected to provide further practical insight into the operation of tokenised financial markets and their interaction with existing financial infrastructure.
Appia sets wider roadmap for tokenised finance
The ECB will also continue preparatory work on Appia, the Eurosystem’s broader strategic roadmap for the development of a European tokenised financial ecosystem.
Unlike Pontes, which focuses on settlement infrastructure, Appia has a wider scope covering the broader architecture required to support tokenised finance across Europe.
Its areas of focus include shared financial infrastructures, interoperability between networks, common technical standards, the issuance and settlement of tokenised financial instruments, collateral management and cross-border connectivity.
The roadmap will also examine the legal and regulatory foundations of tokenised finance, the respective roles of public and private money, and governance arrangements for the emerging European ecosystem.
Eurosystem targets tokenised finance blueprint by 2028
The Appia initiative combines experimentation and analytical work involving the Eurosystem, Danmarks Nationalbank and stakeholders from both the public and private sectors.
The work is aimed at developing a blueprint by 2028 for a more integrated European tokenised financial ecosystem.
The combination of Pontes and Appia reflects the Eurosystem’s broader approach to digital finance: developing the infrastructure for tokenised transactions while examining the standards, interoperability, regulatory frameworks and monetary foundations required for tokenised markets to operate at scale.
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