On a deeper reading of the European Central Bank (ECB) Pontes pilot technical documentation, I’ve amended yesterday’s Pontes post as follows (see bold). I thought that it was important to get right because yesterday’s post implied that the optional “cash tokens” were tokenized central bank money (CeBM) or wholesale central bank digital currency (CBDC), which they are not. Project Appia remains the project platform in which tokenized CeBM is being explored. For good, not overly technical, overviews of the Pontes architecture I thought that the following two posts were very good:
- Pontes Goes Live on Monday: What You Need to Know [BlockStories]
- Pontes: The ECB’s Bridge Solution for Wholesale Settlement [Borja Neira]
Eurosystem Brings Central Bank Money to Tokenized Finance (ECB)
The European Central Bank (ECB) launched Pontes to enable wholesale transactions in tokenized assets to be settled in central bank money via Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) Services. Operating as a consolidated interoperability solution, Pontes integrates the strengths of the Eurosystem’s 2024 exploratory trials. It features a dual settlement model that allows participants to settle the cash leg of transactions either directly in T2 (the Eurosystem’s real-time gross settlement system) via application programming interface (API) based triggers, or on the Eurosystem distributed ledger technology (DLT) platform utilizing cash tokens (a proxy for, not a form of, CeBM — a claim on the ECB to transfer the equivalent CeBM in T2) and dedicated DLT wallets. In both cases, legal settlement finality in CeBM occurs in T2 — for cash tokens, upon defunding or the mandatory end-of-day sweep back into T2 accounts. The hash-link protocol is specifically utilized to ensure secure, synchronized delivery versus payment (DvP) across platforms. Pontes will initially offer a core set of services, with enhanced features and extended operating hours introduced gradually toward full implementation by 2028. [ECB]
ECB to Invest Part of Own Funds in Tokenized Securities, with Settlement via Pontes (ECB)
The European Central Bank (ECB) is initiating investments of its own funds in tokenized, euro-denominated public sector securities to build institutional expertise in distributed ledger technology (DLT). Transactions will settle in central bank money via the Eurosystem’s newly launched Pontes solution, supporting the broader Appia initiative for a European tokenized financial ecosystem. [ECB]
BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.
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