The European Central Bank (ECB) is examining ways to conduct interbank settlements based on blockchain, said a member of the regulator's executive board Fabio Panetta, Reuters reports. The consideration is prompted by the need to maintain control over money in the event that market participants begin to move to distributed ledger technology (DLT).
Blockchain could allow market participants to verify and store transaction information online, eliminating central bank mediation. Therefore, the ECB is currently considering how to allow banks to conduct interbank transactions and securities settlements using DLT and stackablecoin technology in a way that does not lead to "fragmentation of trade and liquidity."
In addition, the ECB fears that allowing third-party issuers to issue stablcoins for such settlements could jeopardize monetary sovereignty. As a possible solution to these problems, the ECB could launch a bridge between private-sector blockchain platforms and its own Target 2 settlement system, the official said.
This could make central bank money available on these private platforms or open up the possibility of issuing its own tokens on them, pegged to the value of fiat currencies, the ECB official said.
In mid-May of this year, Panetta announced the possibility of completing trials of the digital euro by 2026. The European Central Bank has stepped up development of a centralized digital currency amid growing financial instability.
