The European Central Bank (ECB) is pushing forward with its efforts to integrate distributed ledger technology (DLT) into the European financial system, announcing an expansion of its initiative to settle DLT-based transactions in central bank money. 

Under the initiative, the Eurosystem will take a two-track approach to implementing the new technology.

The first phase will focus on developing an interoperability link between DLT-based transactions and the ECB’s existing TARGET Services, which provide real-time gross settlement in central bank money. A detailed timeline for implementation is expected to be announced soon.

The second phase will explore a long-term, integrated solution for settling transactions in central bank money using DLT. This approach will include international financial operations such as foreign exchange settlements, broadening the scope of the initiative beyond Europe’s borders.

“We are embracing innovation without compromising on safety and stability,” said ECB Executive Board member Piero Cipollone, who oversees the project. He emphasized that the initiative is a key step toward enhancing the efficiency of European financial markets through technological advancement, while also supporting the ECB’s broader objective of a more harmonized and integrated financial ecosystem.

The ECB’s decision builds on exploratory work conducted between May and November 2024, during which 64 participants—including central banks, financial institutions, and DLT platform operators—conducted over 50 trials and experiments. 

Some trials involved actual settlements in central bank money, while others were simulations to test the feasibility of integrating DLT into the existing financial framework.

The expansion of this initiative aligns with the ECB’s broader goal of establishing a digital capital markets union, a concept that was emphasized in a Governing Council statement on March 7, 2024. 

By developing these new capabilities, the Eurosystem aims to create a more integrated European market for digital assets while maintaining the safety and reliability of traditional financial systems.

The ECB has committed to continuing its engagement with public and private stakeholders as it refines its approach to DLT-based settlements.