New wholesale settlement solution paves the way for a digital savings and investment union

A wholesale settlement is the online settlement of transactions in central bank money by payment and investment service providers. It does not include payments from consumers or businesses, nor does it use a Retail Central Bank Digital Currency (rCBDC).

The goal is to use Distributed Ledger Technology (DLT) to efficiently trade, offset and hold assets, including securities, in custody. This means that security or foreign currency transactions will be directly interconnected with the cash counter transaction. Access to a wholesale settlement solution should be available to all those who already have access to TARGET financial market infrastructure (T2 or TIPS) within the Eurosystem. DLT based wholesale settlement solutions do not just allow for more efficient settlements; they also reduce dependence on intermediaries and strengthen both the ability of Europe to compete globally and its financial sovereignty.

The Eurosystem recently investigated three different interoperability scenarios: the Deutsche Bundesbank’s trigger solution, the Banca d’Italia’s TIPS hash-link solution and the DL3S-Full-DLT solution from Banque de France. A total of 64 participants from across Europe took part in this investigation. 200 transactions, for a total value of over 1.59 million euros, were completed. All three wholesale settlement solutions made settlement of assets and cash more efficient and transparent than current settlement processes.