The European Central Bank (ECB) has launched Pontes, a new settlement system that allows wholesale transactions in tokenised financial assets to be settled using central bank money. The launch marks a major step in the Eurosystem's plans to integrate distributed-ledger technology (DLT) into European financial markets.

Pontes is designed to give banks and other market participants access to risk-free central bank money when settling transactions involving assets recorded on-chain. Settlement in central bank money is regarded as risk-free because it removes the credit and liquidity risks that can arise between counterparties using commercial bank money. The ECB said this was a key requirement identified during the Eurosystem's trials of distributed-ledger technology in 2024, in which market participants tested DLT-based settlement workflows with central bank money.

The system focuses on wholesale transactions — large-value transactions between financial institutions — rather than payments between consumers.

Core Services at Launch, Full Build-Out by 2028

Pontes initially offers a core set of services, with additional features and longer operating hours to be introduced gradually. Full implementation is expected by 2028. For institutions, that means settlement of on-chain transactions in central bank money is available today in its core form, with the operating model set to deepen step by step toward that deadline.

An initial group of banks and market infrastructure operators has already completed onboarding. The group includes Deutsche Bank, Santander, Société Générale, DZ Bank, the European Investment Bank and Clearstream, spanning commercial banks, a development bank and a European securities depository — a mix that covers both the banking and the post-trade sides of a transaction. The ECB said additional participants are expected to connect in the coming months, widening the system's footprint as it scales.

"The Eurosystem is working to enable a more integrated, innovative and resilient European financial market in the digital age," said Christine Lagarde, President of the ECB, in a statement. "We will continue to make progress in close collaboration with the market."

Tokenisation Seen as a Route to More Efficient Markets

According to the ECB, tokenisation could make financial markets more efficient by combining stages such as issuance, trading, settlement, custody and asset servicing, which are typically handled separately today, while also enabling greater automation through smart contracts — self-executing programmes that run on a distributed ledger.

"Pontes brings the stability and trust of central bank money to the European tokenised finance ecosystem," said Piero Cipollone, a member of the ECB's Executive Board. "It will give an important advantage to help it scale."

Part of a Broader Eurosystem Digital Strategy

The initiative forms part of the Eurosystem's broader strategy to adapt central bank money to increasingly tokenised financial markets. The Eurosystem comprises the ECB and the national central banks of the countries that use the euro. A separate initiative, known as Appia, is developing a blueprint for an integrated European ecosystem for financial services based on distributed-ledger technology, with a target of 2028 — the same year Pontes is expected to be fully implemented. With both timelines pointed at 2028, the near-term expansion of Pontes — new participants, added services and longer operating hours — will serve as the visible markers of how the settlement layer and the wider ecosystem blueprint come together.

Lagarde said the Eurosystem was seeking to build a more integrated and resilient European financial market as digital technologies reshape financial services.

Source: BitcoinKE