Frankfurt — The European Central Bank has moved to bring blockchain-based financial markets closer to traditional banking infrastructure with the launch of a service that enables blockchain transactions to be settled using euros backed by the central bank.

Called Pontes, the new platform links the ECB’s payment system with financial markets operating on blockchain technology. Banks and investors can use central bank money to settle transactions rather than relying on stablecoins or other forms of privately issued digital currency.

Deutsche Bank, Santander and clearinghouse operator Clearstream are among the first institutions to complete the onboarding process for Pontes.

The service will initially be available from 8 a.m. to 4 p.m. Central European Time on business days. The ECB said its capabilities are expected to broaden over time.

The central bank views blockchain as a technology that could improve the efficiency of financial transactions. Through shared digital ledgers, financial assets can be issued and traded without depending entirely on traditional market infrastructure.

According to the ECB, blockchain could accelerate transactions by bringing together several stages of an asset’s lifecycle while allowing for greater automation.

The launch of Pontes also coincides with plans by the ECB to invest a small share of its €23 billion in own funds in blockchain-based securities. The investments will be directed toward highly rated, euro-denominated debt issued by public institutions.

The initiative comes as central banks internationally investigate potential uses of distributed-ledger technology in financial markets.

The Swiss National Bank is operating Project Helvetia, which uses a wholesale digital currency for securities settlement. Meanwhile, the Bank of England is testing blockchain-related applications through its Digital Securities Sandbox.

ECB board member Isabel Schnabel said last month that central banks should “go on-chain,” arguing that such a transition could reduce dependence on privately issued digital alternatives.

Pontes is separate from the ECB’s digital euro project, which is intended for consumers. The central bank is working toward a potential retail digital euro launch in 2029, with the initiative partly aimed at reducing the euro area’s reliance on U.S. credit cards.

The Pontes project is instead designed around financial-market infrastructure, rather than the creation of a consumer cryptocurrency.

For banks and other financial institutions, the system could eventually offer an additional method for settling tokenized securities and other blockchain-based assets using central bank money.

The ECB’s decision to allocate part of its own funds to blockchain-based securities also gives the initiative an investment dimension, although the central bank said the share of its €23 billion holdings devoted to such assets would be tiny.

The broader initiative reflects growing interest among traditional financial institutions in using blockchain not as a substitute for conventional currencies, but as infrastructure that can operate within regulated financial markets.

Original article