The European Central Bank (ECB) has announced that tokenized securities, including debt issued on distributed ledger technology (DLT) networks, will be considered as eligible collateral for Eurosystem central bank operations. Initially, in addition to complying with usual eligible collateral asset requirements, the tokenized collateral must be capable of settlement on the TARGET2 system and be issued via a central securities depository (CSD). This initial support will commence on 31 March 2026.
This will particularly benefit Euroclear, the main European CSD that has been active in DLT issuances, although Clearstream went live with its D7 DLT platform last year.
However, the ECB also said this CSD tokenized collateral is a first step and it will consider expanding collateral support to assets issued entirely on DLT networks, outside of CSDs. It envisages subsets of DLT based assets gradually becoming eligible in a “staggered” approach.
Several digital bonds were issued in the European Union during the wholesale DLT settlement trials in 2024, many of them outside of CSDs. However, the goal is to have greater liquidity for digital bonds, rather than less. A lack of collateral eligibility made digital bond issuances less attractive compared to conventional bonds.
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