In a step toward the development of tokenized securities markets, the European Central Bank (ECB) is preparing to invest in the emerging asset class.
The ECB said that it will be deploying a small part of its own funds portfolio — holdings that the central bank uses to generate income to finance its operations — in tokenized securities, starting with investments in Euro area government securities and European supranational securities.
The bank said that by investing directly in the fledgling market, it’s seeking first-hand experience in trade execution, settlement, systems and portfolio management utilizing tokenized securities — a development that, it said, has the potential to make wholesale market transactions faster and more efficient.
At the same time, the ECB also launched a solution, known as Pontes, for settling wholesale trades in tokenized securities in central bank money.
“Pontes brings the stability and trust of central bank money to the European tokenized finance ecosystem,” said Piero Cipollone, member of the ECB’s executive board, in a release. “It will give an important advantage to help it scale.”
The ECB has started preparations for making its initial investments in tokenized securities, with the bank’s executive board to determine the operational details and timing of the investments.
“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, in a release.
“We will continue to make progress in close collaboration with the market,” she added.