The ECB has launched the first digital euro settlements in the interbank market

The European Central Bank (ECB) has launched the Pontes platform for settlements using the digital euro. This is the first practical step toward introducing a new type of blockchain-based currency in the wholesale segment, notes the Financial Times. The system went live on September 21. It allows banks to settle transactions using central bank money, thereby offering an alternative to stablecoins issued by private companies and pegged to the dollar.

The digital euro will be used for payments between banks: tokenization involves creating digital versions of assets and money that can be securely exchanged on blockchain platforms, the FT explains. The Pontes platform connects private distributed ledger operators with eurozone banks through the existing Target2 system, which handles interbank payments in 21 countries across the region.

Thirteen banks have already joined the project, including Deutsche Bank, Santander, and Société Générale, as well as four distributed ledger operators, among them Clearstream—owned by Deutsche Börse—and the Lithuanian fintech company Axiology. The list of participants will expand in the coming months, a source familiar with the project told the FT. For now, trading hours are limited to 8:00 a.m. to 4:00 p.m. Central European Time, but by 2028, the ECB plans to transition the system to round-the-clock operation, seven days a week.

The ECB itself will be one of the first users of Pontes: the regulator announced on Monday that it will invest “a small portion of its own funds” in tokenized securities. An FT source clarified that this does not involve the purchase of cryptocurrencies such as Bitcoin or private stablecoins such as Tether. The bank will acquire tokenized bonds in its “non-monetary” portfolio to gain practical experience with distributed ledger technology.

The ECB insists that both wholesale and retail digital euros are necessary to protect the sovereignty and independence of the currency area, the FT explains. According to the regulator’s economists, if dollar-denominated stablecoins become widely used in Europe for settling digital transactions, the region could lose control over its own monetary policy. Currently, the majority of global stablecoin transactions take place in dollar-denominated tokens. The dominance of U.S. payment companies Visa, Mastercard, and PayPal creates additional geopolitical vulnerability, the FT reports.

The ECB began work on the wholesale digital euro in 2024. The retail version—a digital counterpart to cash for transactions between citizens and merchants—will require changes to EU legislation. These changes are currently being discussed by the European Parliament, the Council of the EU, and the European Commission, and a political agreement is expected by the end of the year, according to the FT. Beta testing of the retail digital euro is scheduled for 2027, with a launch planned for 2029.

Private banks are skeptical of a retail digital euro, but BNP’s chief economist, Isabel Mateos-i-Lago, said earlier this year that Europe “desperately needs” a wholesale digital currency, according to the FT. The regulator and commercial banks combined will spend about €5.5 billion on the digital euro project by 2029, and an additional €320 million annually will go toward maintaining the system.

This article was AI-translated and verified by a human editor