The European Central Bank and Bank of Japan are embarking on a research project looking into the use of distributed ledger technologies for market infrastructure.
In a speech this week, ECB executive board member Yves Mersch stressed that the bank cannot "at this stage" consider basing its market infrastructure on DLT because the technology is simply not yet mature enough.
However, as Mersch has previously said, the bank is toying with the idea of tapping DLT, among other options, for its revamp of the Target2 real-time gross settlement system and Target2-Securities platform.
If this is to happen, more research into the technology is needed, prompting a collaboration with the Bank of Japan which will see findings released next year.
"This work can help define how new technologies can change the global financial ecosystem of today and ensure that central banks are adequately prepared," says Mersch.
Related to this is how the bank would interface and interoperate with DLT-based settlement services which are not necessarily offered by the ECB itself. Whether a central bank could inject and control the amount of central bank money circulating in a DLT environment; or whether a private sector trustee could ensure that the values circulated in a DLT-based solution are fully backed by a corresponding amount of central bank money held "off-chain”.
"We are on a journey which could radically alter the financial ecosystem as we know it. The ECB is committed to be part of this journey," concludes Mersch.