- Different solutions can facilitate interaction between TARGET services and DLT platforms
- A dedicated group will offer expert input and keep the Eurosystem ahead of tech advances
The European Central Bank (ECB) will explore different ways, in which to settle wholesale financial transactions recorded on distributed ledger technology (DLT) platforms in central bank money, the institution wrote on Friday.
Interaction between TARGET and DLT
The goal of the initiative is to obtain insight into how different solutions could facilitate interaction between TARGET services and DLT platforms. In addition, the European financial institution aims to consolidate and further develop the ongoing work of Eurosystem central banks in this area.
Expert input and guidance
The ECB will set up a dedicated market contact group to support research into DLT and their potential application. The group will offer expert input and keep the Eurosystem ahead of advances in the use of the technology as well as other new technologies in wholesale financial markets.
Keeping pace with digital innovation
The efforts are part of the Eurosystem’s broader work to make sure developments in central bank financial markets keep up and contribute to digital innovation in retail and wholesale payments.
Moreover, the Eurosystem aims to make sure central bank-issued fiat remains a monetary anchor that supports the efficiency, stability, and integration of the European financial system and payments system.
Other efforts to bridge CeFi and DeFi
This is not the first foray of a centralized bank into DeFi. In March, the National Australia Bank started minting the AUDN stablecoin on the Ethereum Mainnet.
On April 20, French bank Societe Generale-Forge (SGF) released a euro-pegged stablecoin, which qualified institutional clients could access.
According to experts, its smart contract code is quite poor. A centralized entity has to approve ERC-20 transfers before the transaction can be processed.
Centralized banks are just starting to take steps into blockchain, so the stablecoin really can’t help being rudimentary. Central bank digital currencies (CBDCs) will eventually be issued based on denylists instead of allowlists.
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