ECB to Launch Blockchain Settlement Pilot Pontes by 2026

The European Central Bank (ECB) has unveiled plans to launch a blockchain settlement pilot named "Pontes" by the third quarter of 2026. This initiative aims to integrate distributed ledger technology (DLT) with the Eurozone's payment systems, specifically connecting DLT platforms with the Eurosystem's TARGET services. The primary goal is to ensure the seamless flow of cash, securities, and collateral across Europe, thereby enhancing financial modernization and efficiency.

The ECB's Governing Council has approved a two-tiered plan for this endeavor. The short-term solution, Pontes, will utilize central bank money for DLT transactions. Additionally, the ECB will consider requests for DLT-based trials and experiments before the launch of the Pontes pilot. The long-term track, named "Appia," will focus on facilitating global operations and analyzing more DLT-based solutions, including international operations such as foreign exchange settlement and engagement in international initiatives. This approach aims to improve the efficiency and competitiveness of current financial markets for securities and payments without compromising safety.

Piero Cipollone, a member of the ECB's Executive Board, emphasized the potential of DLT and tokenization in improving the settlement of financial transactions, despite their nascent stage. The ECB's decision aligns with its commitment to supporting innovation while maintaining safety and efficiency in financial market infrastructures. The ECB has already conducted exploratory work on new technologies like DLT between May and November 2024, with 64 participants conducting over 50 experiments. These findings will be utilized to build the Pontes and Appia approaches.

The ECB is also working on finishing the preparation phase of the digital euro by October 2025. However, there are some doubts from lawmakers regarding the trustworthiness of the central bank following an outage with the TARGET 2 payment system earlier this year. Despite these challenges, the ECB remains committed to leveraging DLT to modernize its payments and settlement systems. The pilot is expected to enhance interoperability and regulatory clarity, potentially impacting euro-backed stablecoins and tokenized securities. The ECB's initiative represents a significant step towards integrating DLT into Europe's financial infrastructure, building upon similar efforts from other central banks and highlighting a growing consensus on DLT's potential in the financial system.