Financial industry adoption of distributed ledger technologies: implications for central bank money settlement

Abstract

Through its Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET) services, the Eurosystem facilitates the settlement of wholesale financial transactions in central bank money, the safest and most liquid settlement asset. The Eurosystem is continuing to modernize its settlement infrastructures and to adapt them to changing user needs, and it is analyzing the potential impact of emerging technologies, including distributed ledger technology, on the settlement of wholesale financial transactions. The initial analysis by the Eurosystem consisted of market outreach and an analysis of possible responses in the event of a significant uptake of distributed ledger technology. Following this initial analysis, the Eurosystem has started exploratory practical work. This paper discusses the rationale for the Eurosystem exploring central bank money settlement of transactions registered on distributed ledger technology platforms, the results of its analysis so far and the envisaged next steps.