Pontes is the first initiative under the Eurosystem’s strategic programme to make central bank money fit for a tokenised future and to support the development of this rapidly evolving financial ecosystem.

“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.

“We will continue to make progress in close collaboration with the market,” she added further.

Tokenisation has emerged as one of the financial industry’s favourite processes, issuing or representing assets in the form of digital “tokens”, typically recorded on distributed ledger technology (DLT) networks.

“For wholesale financial markets, this technology has the potential to make transactions faster and more efficient by bundling multiple steps of an asset’s lifecycle – from issuance and trading to settlement, custody and servicing – and by enabling automation and the development of innovative solutions through smart contracts,” the European Central Bank (ECB) said.

“Pontes builds on the outcome of the Eurosystem’s 2024 tests using DLT for central bank money settlement, during which stakeholders from the public and private sectors indicated that access to a risk-free settlement asset was crucial for the wider adoption of this new technology. Pontes will initially offer a core set of services, to be expanded over time in line with market needs and technological developments. Enhanced features and longer operating hours will be introduced gradually, with full implementation expected by 2028,” the central bank stated further.

“Pontes brings the stability and trust of central bank money to the European tokenised finance ecosystem,” said Piero Cipollone, a member of the ECB’s Executive Board.

“It will give an important advantage to help it scale,” the official noted.

The market is already showing significant interest in Pontes.

An initial group of market participants and DLT operators has completed onboarding and is ready to start using Pontes immediately. Additional participants have reportedly committed to connecting to Pontes in the coming days.

“This engagement demonstrates confidence in the potential of this innovation to put Europe at the forefront of the transformation of financial services. The Eurosystem will support this transformation and continue to enhance Pontes in line with evolving market needs,” the ECB said.

The development of an integrated ecosystem for DLT-based financial services has continued under Appia, involving experimentation and analytical work by the Eurosystem, Danmarks Nationalbank and stakeholders from the public and private sectors, with the goal of delivering a blueprint by 2028.

On Monday, the ECB also announced the launch of its preparatory work, under which the central bank will invest a small portion of its funds in tokenised securities.

This will enable the ECB to gain practical experience as an investor and build institutional expertise in the use of distributed ledger technology (DLT) in financial markets.

The ECB will be using its “Own Funds Portfolio,” a non-monetary policy entity that provides the central bank with income to help fund operating expenses, excluding those related to the delivery of its supervisory tasks.

“This step will also support the Eurosystem’s strategy to make central bank money fit for the digital age. Key elements of this strategy are Pontes, the Eurosystem’s solution for settling tokenised assets in central bank money, which was launched today, and the Appia initiative, which will deliver a blueprint for a tokenised financial ecosystem in Europe,” ECB stated further.

Tokenised financial markets continue to evolve, alongside the development of new DLT-based market infrastructures. By investing directly, the ECB will gain first-hand experience across the full investment lifecycle, including trade execution, settlement, systems and portfolio management activities. Pontes will settle the purchases in central bank money.

Initial investments will focus on euro-denominated securities issued by euro area central governments, regional governments, agencies and European supranational institutions. Once the preparatory work is completed, the ECB’s Executive Board will determine the operational details and timing of the investments, taking into account developments in tokenised issuances and the broader tokenised financial ecosystem in Europe.

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