Group items tagged

The Swiss National Bank clarified the criteria for allowing distributed ledger technology (DLT) trading facilities to access to the Swiss Interbank Clearing (SIC) payment system, to enable atomic securities settlement. This simultaneous exchange of a tokenized asset for cash ideally requires access to the payment system and an account at the central bank. Last year new legislation came into force that created a "DLT trading facility"  license in the Financial Market Infrastructure Act (FinMIA), without which separate licenses would be needed for trading versus custody and settlement. DLT trading facilities that use SIC are expected to have a central bank account or "sight deposit". 

"DLT can be thought of as blockchain's predecessor. Blockchain is a new type of distributed ledger that uses encrypted blocks of data and collects them into an unbreakable chain. There are also even newer types of DLT that have built off of blockchain's advancements. In this sense, blockchain is just one important part of the natural evolution of distributed ledger technology. "

The European Central Bank (ECB) published the list of the first institutions to participate in its trials of the settlement of wholesale transactions on distributed ledger technology (DLT) based platforms using central bank money. The list is comprised of five central banks, ten institutions, six market DLT operators and five central banks. The trials will involve real transactions as well as mock simulations, with most of the tests focusing on securities settlement. There also plans to consider use cases for payment versus payment (FX) and cross border payment. Three settlement solutions are part of the trials, provided by the central banks of Germany (RTGS-based "trigger" solution), France (wholesale central bank digital currency (CBDC) solution) and Italy (TIPS Hashlink solution). https://www.ecb.europa.eu/press/intro/news/html/ecb.mipnews240403.en.html

The Italian Banking Association (ABI) published the results of its Project Leonidas (Liquidation Effective ONchaIn Dlt Asset on Check) distributed ledger technology (DLT) based wholesale central bank digital currency (CBDC) proof of concept (POC) work. The project, which concluded at the end of 2023, was carried out under the Banca d'Italia Milano Hub innovation center. It investigated the benefits of using DLT-based wholesale CBDC for interbank transactions, so that the capacity, efficiency and robustness requirements of central bank systems are met.

Palau has contracted with Soramitsu Labs to build a distributed ledger technology (DLT) based government bond issuance platform. Soramitsu, the developer of Cambodia's Bakong DLT-based national payment system, is also working with Laos, the Philippines and Vietnam on central bank digital currency (CBDC) projects, and with the Asian Development Bank on a proof of concept for the cross border settlement of bond transactions. The 100 million yen cost of the Palau project will be covered by Japan's Ministry of Economy, Trade and Industry, and the Japanese foreign and finance ministries will provide advice on strategy and project management.

This report offers an analytical framework that allows for more systemic assessments of distributed ledger technology (DLT) and its applications. It examines the evolution and typology of the emergent technology, its existing and projected applications, and regulatory and policy issues that they entail. This report highlights the trends, concerns, and potential opportunities of DLTs, especially for Asian markets. It also identifies the benefits and risks to using DLT and offers a functional and proportional approach to these issues.

"The Canadian Securities Administrators (CSA) are focusing on understanding and regulating distributed ledger technology (DLT) and its related components. The Canadian securities regulatory agency included a section on DLT and crypto assets in its Business Plan 2019-2022 that was published on July 13. "

A group of 11 banks, including NatWest and Deutsche Bank, have been trialling a distributed ledger technology (DLT) based platform for intraday FX swaps. The trial used technology from Finteum, which has been working on a DLT-based intraday FX swaps platform first announced with R3 and Fnality in 2019. During the trial, the banks engaged in simulated trading and discussion sessions. The plan now is to move to live transactions later this year or early in 2022.

"Quant has developed Overledger DLT gateway - the world's first DLT gateway for enterprise that delivers interoperability across different systems, networks, and DLTs. Now, we're building on this platform to help enterprises, governments, and individuals, across the globe benefit from the true potential of an incredibly powerful technology. "

The Bank of Thailand launched the Project Inthanon and Project DLT scripless bond initiatives in 2018. Project Inthanon is a proof-of-concept for wholesale domestic and cross-border funds transfer using central bank digital currency. The Project DLT scripless bond is an initiative to increase efficiency for the saving bond registration and sales processes.

This paper discusses the forms and advantages of a DLT-based digital Euro. It analyzes current CBDC projects and explains the intentions behind the respective CBDC projects. In addition, possible threats for the financial system caused by a CBDC introduction, such as financial stability and data protection concerns, are discussed, and possible solutions are outlined. http://explore-ip.com/2020_The-Digital-Euro-and-the-Role-of-DLT-for-Central-Bank-Digital-Currencies.pdf

On 11 December 2020, the Swiss Federal Council decided that parts of the Federal Act on the Adaption of Federal Law to Developments in Distributed Ledger Technology (DLT Bill) adopted by the Swiss Parliament in September 2020, will enter into force on February 1, 2021. The implemented elements will enable the introduction of ledger-based securities (Registerwertrechte). The remaining provisions of the DLT Bill are expected to enter into force as originally planned on August 1, 2021.

Banca d'Italia and Deutsche Bundesbank have been ramping up their efforts to utilize distributed ledger technology (DLT) in central bank money settlements. The initiatives aim to complement current central bank money settlement practices with programmable trigger mechanisms that connect DLT-based assets, like tokenized securities, and cash to be settled via conventional payments systems. This could be seen as complementary to the Digital Euro, which is currently under consideration.

On July 18, 2023 the European Central Bank (ECB) New Technologies for Wholesale settlement Contact Group (NTW-CG) held its second meeting. The Group is exploring how to settle DLT transactions with central bank money, including a wholesale CBDC. The pilots will be open to financial institutions with access to the TARGET payment system, with the onboarding to start later in 2023 and tests to commence in Q2 2024. Three interoperability-type solutions will be tested. Deutsche Bundesbank and Banca d'Italia will test two different non-CBDC solutions that initiate payments on TARGET and use trigger chains to instruct the DLT-based securities settlement platform to transfer ownership of securities as soon as payment is confirmed. The Banque de France will test a wholesale CBDC token option based on its previous trials, in which settlement will be enabled through interoperability with multiple other DLT ledgers.

The Banque de France (BdF) published an updated set of conclusions and lessons learned from its twelve distributed ledger technology (DLT) based wholesale central bank digital currency (CBDC) experiments. They show the operational feasibility and practical implementation of the three models it has conceptualized for issuing DLT-based wholesale CBDC; the interoperability, distribution and integration models. They all address key aspects of wholesale CBDC implementation and each model offers different capabilities and functionalities compared to the conventional systems, so they can be complementary rather than exclusive.

Regulation 2022/858 of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology (DLT) was published in the Official Journal of the European Union. Tokenization is expected to open up opportunities for efficiency improvements in trading and post-trading processes, but EU financial services legislation was not designed with such technology and crypto-assets in mind and contains provisions that could limit the use of blockchain technology. For these reasons, the DLT Pilot Regime is being introduced to allow for such technology to flourish, while accounting for potential risks at the same time.

The European Central Bank (ECB) published an update on its explorations of central bank money settlement of wholesale transactions on distributed ledger technology (DLT) platforms. Together with interested market players, the Eurosystem intends to test three cross-platform settlement solutions: The first is a "trigger" solution developed by the Deutsche Bundesbank, in which euro central bank money settlement would take place on the existing TARGET settlement system. The second is a "TIPS Hash-Link" solution developed by the Banca d'Italia, in which settlement would take place in an infrastructure based on TIPS, which is currently used for settling instant retail payments. The third is a full-DLT solutions developed by the Banque de France, in which euro central bank money settlement would take place on a DLT platform, operated by the central bank or jointly with other parties.

The European Central Bank (ECB) published the learning strategy and key performance indicators (KPIs) proposed for its exporatory work on new technologies for central bank money settlement of wholesale financial transactions. The work is focused on three interoperability-type solutions, (i) trigger (ii) TARGET Instant Payment System (TIPS) hash link, and (iii) full distributed ledger technology (DLT) interoperability. The first two solutions involve the market platform interoperating with the existing TIPs platform. Only the last one (full-DLT) involves what the rest of the world calls wholesale central bank digital currency (wCBDC), in which the payment instrument is DLT-based central bank money (CeBM).

Clearstream, Deutsche Börse Group's post-trade business, joins the European Central Bank (ECB) trials and experiments, aimed at exploring the potential of distributed-ledger technology (DLT) for wholesale central bank money settlement. Clearstream aims to assess the feasibility of using DLT for wholesale transaction processing, using tokenized securities, including conducting euro-denominated issuance and delivery-versus-payment (DvP) transactions across different use-cases and payment models. Three solutions will be tested by the central banks of Germany (Trigger solution), France (wholesale central bank digital currency (CBDC)) and Italy (TIPS Hashlink).

As part of the Eurosystem exploratory work, the first two trials with the Deutsche Bundesbank's Trigger Solution were successfully settled. The use case comprised the issuance and primary distribution of a commercial paper with the use case team Clearstream as a market distributed ledger technology (DLT) operator, and two market participants (DekaBank and DZ Bank). The exploration was conducted as a trial in the participants' production systems and ultimately resulted in real and final bookings in TARGET, the Eurosystem's payment system, by using the Trigger Solution. The Trigger Solution links DLT platforms operated by the market with the traditional Eurosystem payment system (TARGET), thus enabling the direct settlement of DLT-based wholesale transactions in central bank money on participants' existing RTGS accounts.