Blockchain for Banking News

ECB outlines goals for DLT wholesale settlement trials

euro wholesale DLT trials

In December the European Central Bank (ECB) launched a call for the first wave of participants for wholesale settlement trials involving DLT networks using central bank money (CeBM). Tests start in May. Now it has shared a detailed list of goals and questions to assess the trials of the three different settlement options. 

As previously reported, these include the Bundesbank’s Trigger payment solution, the Bank of Italy’s TIPS HashLink solution and the DLT-based wholesale CBDC from the Banque de France.

One area that the Eurosystem planned to explore was 24/7 availability. However, participating banks said there’s currently no appetite for it because such a change would significantly impact bank treasury activities. Hence, the ECB pushed that topic to desktop research.

Last November the ECB outlined nine themes for investigation. The new report fleshes out those themes in far more detail.

The ECB wants to gather information in three areas:

  1. It wants to compare the performance of the three payment options.
  2. It’s keen to learn more about each option independently.
  3. It has more general questions on related topics, such as reconciling between DLT and participant systems and balancing privacy.

Comparing DLT settlement solutions

Comparing performance might be easier said than done. One set of tests involves real money. Hence, in most cases the DLT solutions might decide to integrate with one, maybe two of the settlement options. Like-for-like comparisons ideally involve the same transactions happening via all three solutions, so that’s more probable through simulations, which isn’t quite the same.

One obvious comparison will be settlement performance, such as latency and throughput. A related measure is scalability, which refers to how many different DLT infrastructures the settlement solutions can connect to without impacting performance.

Another area to be explored is liquidity savings mechanisms (LSMs). While the trigger solution will have all options available, the ECB wants to make several available for TIPS HashLink users and the CBDC. The prioritized ones are autocollateralisation, partial settlement, netting and floor/ceiling.

One of the themes identified in November was cost comparisons. However, the ECB emphasized that this is not a feasibility assessment because it hasn’t committed to launching any of these solutions.