The European Central Bank (ECB) is expanding its distributed ledger technology (DLT) test that was launched in April. This second phase of testing will explore new use cases and involve additional private financial institutions as well as three more central banks.
A total of forty-eight financial institutions will be taking part in this new phase. Among the participants are divisions of some of the largest banks globally, including ABN AMRO, BNP Paribas, Bank of New York Mellon, HSBC, J.P. Morgan, and Société Générale. All participants in both rounds of testing were selected through a call for applicants that was issued in December.
The new group of participants will be testing wholesale domestic payments within the euro area, various securities-related scenarios, and foreign exchange payment-versus-payment transactions between central banks. The latter two tests will involve actual settlements using central bank money instead of commercial bank funds.
The initial phase of testing involved 14 participants, which included private institutions and central banks. Some of these participants will also be part of the second phase. The focus of the first round was on delivery-versus-payment settlement of transactions involving government bonds and utilized 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 are concentrated on the interaction between DLT transaction interoperability and the ECB’s existing TARGET settlement system, particularly in the context of real-time gross settlement methods such as payment-versus-payment and delivery-versus-payment.
The results from these tests have a wide range of potential applications, including the use of cash and tokenized securities, and even central bank digital currency (CBDC). Notably, only the French solution was specifically designed for CBDC.
The same three interoperability systems will continue to be tested in a follow-up to Project Meridian, which involves the participation of the Bank of England and central banks from Belgium, Germany, France, Italy, Lithuania, the Netherlands, Spain, and the Hong Kong Monetary Authority.