Notable financial firms are among the new participants in the DLT testing conducted by the European Central Bank.

Expanding on its April initiative, the European Central Bank (ECB) launched a distributed ledger technology (DLT) test. Three additional central banks and a fresh set of use cases including the entry of private financial institutions will be tested in this second round.

In the upcoming phase, 48 financial institutions will take part. Several of the largest banks in the world, including ABN AMRO, BNP Paribas, Bank of New York Mellon, HSBC, J.P. Morgan, and Société Générale, are among them. A call for applications in December was used to recruit participants for both rounds of examinations.

Testing both modern and outdated technology simultaneously

The new cadre will work on testing foreign exchange payment-versus-payment transactions amongst central banks, a range of use cases pertaining to securities, and wholesale domestic payments inside the euro area. Instead of using commercial bank money, live settlements using central bank money will be used in the next two tests.

Fourteen participants, including corporate organisations and central banks, were participated in the initial testing phase. A portion of those studies, which are included in the second wave as well, examined delivery-versus-payment settlement of transactions involving government bonds using three interoperability solutions created by various European central banks: the Full DLT Interoperability from Banque de France, the TIPS Hash-link from Banca d'Italia, and the Trigger Solution from Deutsche Bundesbank.

Real-time gross settlement can take two forms: payment-versus-payment and delivery-versus-payment. The focus of the tests is on how the ECB's current TARGET settlement mechanism and DLT transaction interoperability interact.

Test findings are widely applicable.

The tests can be applied to central bank digital currency (CBDC) as well as cash and tokenized securities. The French solution was the only one created especially for CBDC.

In conclusion, an extension of Project Meridian will evaluate the same three interoperability systems. In that effort, the Bank of England is a participant. Along with the Hong Kong Monetary Authority, it also becomes a member of the central banks of Belgium, Germany, France, Italy, Lithuania, the Netherlands, and Spain.