The Eurosystem is conducting wholesale DLT settlement trials in central bank money. In May the first wave of participants commenced testing and on Friday the European Central Bank shared the second group who start trials next month. While Germany dominated the first group, the latest group of 48 private firms is highly diverse. It also features the Hong Kong Monetary Authority (HKMA) as a participant, to trial cross border or payment versus payment transactions.
No less than 15 market DLT operators are involved in the trials, including two DLT Pilot regime candidates. Most of the big banks with their own platforms are taking part. That includes Credit Agricole CIB, Euroclear (DFMI), Goldman Sachs (GDAP), HSBC (Orion), Iberclear, JP Morgan, SocGen Forge and UBS (Tokenize).
The two DLT Pilot Regime candidates are Germany’s 21X and Lithuania’s Axiology. While they’re not yet in operation given their applications are pending, both have hybrid trading and settlement systems (DLT TSS).
In its announcement the ECB highlighted that the high number of participants demonstrated a ‘strong interest’. That’s an understatement, especially given the lack of interest in the DLT Pilot regime. That said, the scope of the two programs are very different, with the Eurosystem focused on the integration with central bank money.
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Use cases in the trials
The trials involve a mix of real payments with volume limits and simulations. One group of tests involves domestic payments, in some cases likely using tokenized deposits, where the central bank money settlement will be simulated. There’s a variety of securities settlement use cases, some of which will use real money and others will be simulated. Thirdly, there will be payment versus payment transactions, which is where the HKMA comes in, although these will be simulated.
Three central banks are providing interoperability solutions for the trials. They are the central banks of Germany (Trigger solution), France (wholesale CBDC) and Italy (TIPS Hashlink). These three are also involved in the recently announced Project Meridian FX for multi currency payments with the Bank of England.
The first wave of Eurosystem DLT trials involved these three central banks, plus the Austrian and Luxembourg ones. Additionally, in the second wave the central banks of Belgium, Spain, the Netherlands and Lithuania are participating.
