DLT settlements to be used by European central banks

Europe still needs to tap into the potential of the crypto industry, and reportedly, the central banks of Germany and Italy are on it. Banca d’Italia, the central bank of Italy, and Deutsche Bundesbank, the central bank of Germany, are looking forward to utilizing the DLT technology. 

DLT or distributed ledger technology is the basis of the financial aspect of the crypto industry and will provide new ways for settlement of payments for the banks as per the release. In their joint workshop, the two central banks decided to use DLT not for replacing the traditional monetary system but to complement it. 

“The initiative focused on the possibility of complementing established means of central bank money settlement with a programmable trigger mechanism connecting the DLT-based asset (i.e., a tokenized electronic security) and the cash to be settled by means of conventional payment systems, preserving the delivery-versus-payment mode of settlement, which minimizes the counterparty risk for both the buyer and the seller,” said the release.

DLT technology can change the payment industry

According to the Italian central bank governor Ignazio Visco, the DLT technology can generate additional revenue streams, target new services and products, increase cost optimization, and make the entire financial architecture more firm and efficient than it already is. 

Deutsche Bundesbank President Jens Weidmann also commented on the integration of DLT with the traditional monetary system. 

“If market participants want to reap the benefits of new technologies like DLT for the settlement of tokenized assets, central banks should support that by enabling the settlement of the responding cash leg in secure central bank money,” he said.

The President of the German central bank believes that the creation of a “wholesale central bank digital currency” would require more time when compared to the implementation of the trigger system that the government is introducing. 

According to our previous report, European Commission is bullish on the blockchain technology and believes in its uniqueness.