The European Central Bank (ECB) has revealed plans to collaborate with the Bank of Japan on how distributed ledger technology (DLT) can be applied to market infrastructure.
Speaking during the annual Handelsblatt conference in Frankfurt, Yves Mersch, member of the executive board of the ECB revealed its plans for a DLT research project alongside the Bank of Japan.
“It cannot be stressed enough that any technology-based market infrastructure service needs to be mature enough to meet high requirements in terms of safety and efficiency,” said Mersch.
“In order to lead the way the ECB has engaged in international collaboration and together with the Bank of Japan, we agreed to launch a joint research project which studies the possible use of DLT for market infrastructure.
“This work can help define how new technologies can change the global financial ecosystem of today and ensure that central banks are adequately prepared.”
Recent industry commentary has focused on how DLT can be implemented across the industry while taking into account existing legacy systems and regulations.
Speaking during last week’s Global Custody Forum in London, industry participants expressed concern that various industry sectors were wary to engage with one another over the development of DLT with some fearing it could threaten their business offerings.
Sonia Maloney, chief operating officer at Norrep Capital Management, suggested asset managers in particular were not experiencing the benefits of DLT because of a lack of cooperation.
Mersch also moved to allay concerns about the DLT’s disruptive power and pointed to the development of the ECB’s Target2-Securities (T2S) initiative as an example of successful wide scale implementation.
“Last year the Eurosystem, which comprises the ECB and the national central banks of the euro area, launched a central bank service called T2S and just like DLT, it was called ‘a game changer’,” said Mersch.
“T2S is changing the European post-trade landscape not only by offering an integrated settlement service in central bank money for securities transactions, but also because it has brought post-trade harmonisation beyond what has been seen before.