ECB launches 'Pontes' to settle tokenised assets in central bank money
The Eurosystem has launched Pontes, a system allowing banks to settle trades in tokenised assets using central bank money, and the ECB said it will invest some of its own funds in tokenised securities through it, the first concrete steps towards making the euro fit for the digital age.
The European Central Bank (ECB) has introduced Pontes, a system designed to facilitate tokenized asset trades using central bank money. Pontes enables wholesale transactions of stocks, bonds and other digital tokens to settle directly within the ECB's reserves. This is a significant development, as previous tokenized trades have typically settled in commercial bank money or stablecoins, which carry credit risk.
ECB President Christine Lagarde emphasized the importance of a risk-free settlement asset for the advancement of blockchain technology. She stated that the ECB's mission is to create a more integrated, innovative and resilient European financial market in the digital age. Thirteen institutions, including major banks and financial entities, have already onboarded and are prepared to utilize the Pontes system immediately.
Additionally, the ECB plans to invest a portion of its own funds in tokenized securities, with purchases settled through Pontes. The initial focus will be on euro-denominated debt issued by euro area governments, regional authorities, agencies and European supranational institutions.
Richard Baker, founder and CEO of Tokenovate, highlighted Pontes as a crucial step towards integrating tokenized markets into the core of the euro area's financial infrastructure. However, Baker also pointed out that the current service operates within existing market hours, and the longer-term goal is to support more continuous, potentially 24/7, settlement.
This gap in the market is where Europe is currently lagging behind, with American markets already moving faster. For instance, the New York Stock Exchange is developing a blockchain-based venue for trading tokenized shares and funds around the clock, while BlackRock has been running a tokenized money market fund since 2024.
While Pontes is primarily aimed at banks and markets, not consumers, the European digital euro (retail equivalent) is a separate project that is further from reality. The European Parliament's economic committee approved the digital euro's position in June, paving the way for negotiations with member states, and final legislation is expected by the end of 2024. If approved, a pilot involving 36 payment providers will commence in September 2027, with potential issuance in 2029.
Written by urgent.news from Euronews Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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