The European Central Bank (ECB) is extending its distributed ledger technology (DLT) test, originally launched in April. The second phase of testing will explore new use cases with an increased number of private financial institutions and three additional central banks.
A total of forty-eight financial institutions will participate in the new phase, including divisions of major global banks such as ABN AMRO, BNP Paribas, Bank of New York Mellon, HSBC, J.P. Morgan, and Société Générale. The participants for both rounds of testing were selected through a call for applicants released in December.
The new group will conduct tests for 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 first phase of testing included 14 participants, consisting of private institutions and central banks. Some of these participants are also involved in the second phase, focusing on delivery-versus-payment settlement of transactions with government bonds using three interoperability solutions developed by different European central banks.
The tests concentrate on the interaction between the interoperability of DLT transactions and the ECB’s existing TARGET settlement system, with a particular focus on payment-versus-payment and delivery-versus-payment as forms of real-time gross settlement.
The results of the tests are expected to have broad applications, including the use of cash and tokenized securities, and their potential applicability 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, which includes the participation of the Bank of England, along with the central banks of Belgium, Germany, France, Italy, Lithuania, the Netherlands, and Spain, as well as the Hong Kong Monetary Authority.