ECB's Pontes System Connects DLT Platforms to Eurosystem TARGET Services

The European Central Bank (ECB) has made a significant move in tokenisation by launching Pontes, which links market Distributed Ledger Technology (DLT) platforms to the Eurosystem's TARGET Services. This allows DLT-based wholesale transactions to settle in central bank money for the first time.

Pontes is open to entities with T2 access, such as authorised central securities depositories and DLT settlement operators. It uses a hash-link protocol so that the asset leg and cash leg of a delivery-versus-payment trade either both settle or neither does.

The ECB plans to allocate a small share of its roughly EUR 23 billion own-funds portfolio to tokenised public sector and supranational debt settled through Pontes. This move is seen as significant, with Christine Lagarde describing Pontes as 'a digital euro made available for banks'. Europe is not trying to win the tokenisation race by building the fastest chain but ensuring that safe settlement assets are available on whatever chain wins.