ECB launches Pontes for central bank money

The European Central Bank has launched a new solution called Pontes. This system enables wholesale transactions in tokenised assets to be settled using central bank money.

Pontes builds directly on the results of the Eurosystem's 2024 tests which used distributed ledger technology, or DLT, for central bank money settlement. It functions as a bridge connecting distributed ledgers to the existing Target settlement service. The system will start with a core set of services, which the ECB plans to expand over time based on market demand and technological progress. Enhanced features and longer operating hours will be introduced gradually, with a full implementation targeted for 2028.

"The Eurosystem is working to enable a more integrated, innovative and resilient European financial market in the digital age," said Christine Lagarde, president of the ECB. She added that the institution would continue to make progress in close collaboration with the market.

Initial Onboarding and Future Plans

A first group of market participants and DLT operators has already completed the onboarding process. They are ready to begin using Pontes immediately. Additional participants have committed to connecting to the new system in the coming months.

In a related move, the ECB has started preparatory work to invest a small portion of its own funds in tokenised securities. The goal is to gain first-hand experience with blockchain technology in financial markets. Initial investments will focus on euro-denominated public sector securities from the euro area and European supranational securities.

The Appia Roadmap

Alongside Pontes, the ECB is continuing to lay the groundwork for a broader initiative called Appia. This is the strategic roadmap through which the Eurosystem intends to help design a comprehensive European tokenised financial ecosystem.

The scope of Appia extends far beyond just payments. It includes developing shared infrastructures, ensuring network interoperability, and establishing common technical standards. The roadmap also covers the issuance and settlement of tokenised financial instruments, collateral management, cross-border connectivity, and the necessary legal and regulatory foundations. It will address the roles of both public and private money and establish European governance for the new ecosystem.

This initiative involves experimentation and analytical work conducted by the Eurosystem, Danmarks Nationalbank, and various stakeholders from both the public and private sectors. The collective goal is to deliver a complete blueprint by 2028.

Market and Legal Perspective

Shahid Jamal Tubrazy, a lawyer at Crypto Law Consult, commented on the development. He called Pontes a significant step in bringing tokenised markets closer to mainstream financial infrastructure. Tubrazy noted that the legal and regulatory challenge now is ensuring that DLT-based issuance, custody, settlement, anti-money laundering controls, and investor protection operate consistently across interoperable networks.