ECB to Develop Fiat Currency Settlement System for Distributed-Ledger Transactions

The European Central Bank (ECB) mentioned it’s trying to develop a approach of settling distributed-ledger expertise (DLT) transactions with fiat foreign money because it expands its work on the important thing characteristic that underpins the blockchain and cryptocurrencies.

The financial institution plans a two-stage strategy to utilizing the expertise, which is a decentralized database that’s maintained and up to date independently by particular person contributors in a big community. Firstly it should develop a system linked to its current Target settlement system. Target ensures “the free movement of money, securities and collateral throughout Europe,” it mentioned.

“This is a crucial contribution to enhancing European monetary market effectivity via innovation,” Executive Board member Piero Cipollone, who oversees the initiative, said in a Thursday statement.

The bank will also look for a long-term, more integrated way of settling DLT-based transitions in fiat money, which will include foreign exchange settlement.

The ECB has been exploring digital currency technology since 2023. The initiative will build on exploratory work which invited financial market stakeholders to explore “wholesale monetary transactions recorded on distributed ledger expertise platforms to be settled in central financial institution cash.”

A timeline on the financial institution’s plans shall be made public later.