Tokenisation and DLT
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Building a more connected, transparent, and efficient financial system
Financial market infrastructures have traditionally relied on centralised systems, where payments and securities transactions are processed and settled through a central database.
In recent years, there have been considerable advancements in this field, including the introduction of innovative solutions such as tokenisation and distributed ledger technology (DLT). These technologies could transform wholesale markets by offering new, improved ways to settle financial transactions.
For central banks, these innovations present both opportunities and challenges, particularly when it comes to ensuring that financial transactions involving tokenised assets remain safe and efficient and can use central bank money for safe settlement.
What is tokenisation?
Tokenisation is a process that involves issuing or representing assets in the form of digital “tokens” with DLT. Tokenisation offers the potential for enhanced efficiency, transparency and programmability in financial transactions.
What is a distributed ledger technology?
Distributed ledger technology (DLT) manages and maintains a decentralised database, or “distributed ledger”, allowing information to be shared and kept synchronised across a network. The best-known type of distributed ledger is blockchain.
Why are these innovations important for the Eurosystem?
The Eurosystem is committed to supporting the evolving needs of financial markets while maintaining the safety, stability and efficiency of the euro area financial ecosystem. This approach aligns with wider EU policies to strengthen European autonomy and support the international role of the euro.
Towards a digital capital markets union – Piero Cipollone, member of the Executive BoardHow the Eurosystem is using tokenisation and DLT
The Eurosystem is following a dual-track strategy
Pontes
The first track, Pontes, is a solution that supports near-term market needs by allowing euro-denominated wholesale financial transactions to be settled on market DLT platforms against central bank money.
Appia
The second track, Appia, is exploring a long-term vision for a future-ready, integrated financial ecosystem that leverages tokenisation and DLT.
Appia
Exploratory work on new technologies for wholesale central bank money settlement
Between May and November 2024, the Eurosystem explored the settlement of DLT-based transactions in central bank money together with 64 market participants, conducting over 50 trials and experiments.