ECB to Invest Part of Its Own Funds in Tokenised Securities
The ECB is preparing to invest a small portion of its own funds in tokenised securities settled in central bank money through its new Pontes service.
The European Central Bank is preparing to invest a small portion of its own funds in tokenised securities, with settlement in central bank money through the Eurosystem’s new Pontes service, the bank announced in a press release on September 21.
Initial purchases will focus on tokenised, euro-denominated securities issued by euro-area governments, public agencies and European supranational institutions. The ECB has not disclosed the amount it plans to invest or when purchases will begin; the Executive Board will decide after preparatory work.
The rationale is learning by doing. “By investing directly, the ECB will gain first-hand experience across the full investment lifecycle, including trade execution, settlement, systems and portfolio management activities,” the ECB said in the announcement. The money comes from the bank’s own-funds portfolio, a non-monetary-policy portfolio whose income helps cover operating expenses unrelated to supervisory duties, so the purchase size matters less than the signal a major central bank is sending about distributed-ledger settlement being production-grade.
Pontes, launched the same week, settles tokenised transactions in central bank money, combining three tested systems into one service with settlement in cash tokens or through the Eurosystem’s T2 payment system. It sits alongside Appia, the ECB initiative drawing up a blueprint for tokenised markets in Europe. “Pontes will allow market participants, including those who took part in the exploratory work, to further enhance their services, thereby supporting market developments while preserving the anchoring role of central bank money,” the release states.
The ECB is not moving alone. JPMorgan filed for a tokenised Ethereum money-market fund in May, New York Life Investment Management introduced a tokenised bond fund in June, and India launched a pilot earlier in September to issue and settle tokenised corporate bonds using its wholesale digital rupee, reportedly. The ECB’s step takes central banks from operating the settlement plumbing to holding the assets themselves.
The Executive Board’s decision on the amount and start date is the next scheduled step.
