Last week the European Central Bank (ECB) announced the first participants in its wholesale DLT trials using central bank money for settlement. One of the groups participating includes DekaBank and LBBW, which will use the SWIAT DLT platform founded by DekaBank. They aim to demonstrate delivery versus payment using the Bundesbank’s trigger payment solution.
The trigger solution is one of three payment options that the ECB offers as part of the trials. Another option is a wholesale central bank digital currency (wholesale CBDC) provided by the Banque de France. With the trigger solution, DLT platforms will integrate with the Trigger blockchain, which settles payments through a link with the Target2 payment system.
DekaBank founded SWIAT with LBBW and Standard Chartered’s SC Ventures also investing. It previously developed its Cycros trigger solution back in 2022. SWIAT notes that something like the trigger solution for digital securities settlement can eliminate counterparty risks because the asset and cash exchange simultaneously. One of SWIAT’s most recent initiatives involved tokenizing fund shares. A representative of SWIAT also sits on the ECB market contact group for new technologies.
“By participating in the trials, we are helping to make the processing of blockchain transactions for institutional customers faster, safer and easier in the future,” said Dirk Kipp, Global Head of Financial Institutions & Markets at LBBW.
The trials will be executed in two waves, with the first starting in May. Applications are still open for the second wave, which will commence in July. SWIAT says it plans to work on other use cases with additional financial institutions for the second wave.
Other central bank payment trials
With ten institutions and six DLT platforms participating in the first wave, the ECB can regard that participation level as a success. In contrast, the DLT Pilot Regime only managed to attract four applicants. The ECB trial functions under current regulations, unlike the DLT Pilot Regime.
Previously the Banque de France issued wholesale CBDC tokens used to settle the issuance of a European Investment Bank (EIB) digital bond. The Swiss National Bank is currently running a pilot that allows wholesale CBDC as the payment instrument for SIX Digital Exchange digital securities transactions.
As an aside, SWIAT forecasts that by 2030 tokenization will reach €3 trillion, one fifth of the widely used BCG estimate. In order to reach the BCG figure, hockey stick growth would need to start soon.
