By David Barwick – FRANKFURT (Econostream) – The European Central Bank on Monday said in two press releases that the Eurosystem had launched its Pontes settlement solution for tokenized assets and that the ECB was preparing to invest a small portion of its own funds in tokenized securities.

Pontes allows wholesale transactions in tokenized assets to be settled in central bank money and represents the first initiative under the Eurosystem’s strategy for tokenized finance, the ECB said in one of the releases. Banks and market infrastructures will join gradually, with enhanced features and longer operating hours to be introduced over time and full implementation expected by 2028.

“The Eurosystem is working to enable a more integrated, innovative and resilient European financial market in the digital age,” ECB President Christine Lagarde said in the Pontes release. “We will continue to make progress in close collaboration with the market.”

In the second press release, the ECB said it had launched preparatory work to invest a small portion of its own funds in tokenized securities in order to gain practical experience as an investor and build institutional expertise in distributed ledger technology. Its own-funds portfolio is separate from monetary policy and provides income to help finance operating expenses other than those related to banking supervision.

Initial investments will focus on euro-denominated securities issued by euro area central and regional governments, agencies and European supranational institutions, according to the release. Purchases will be settled in central bank money through Pontes.

Once preparatory work is complete, the Executive Board will decide on the operational details and timing of the investments, taking account of developments in tokenized issuance and the broader European tokenized-finance ecosystem, the ECB said.

The central bank said direct investment would give it first-hand experience across the investment lifecycle, including trade execution, settlement, systems and portfolio-management activities.

“Pontes brings the stability and trust of central bank money to the European tokenised finance ecosystem,” ECB Executive Board member Piero Cipollone said in the Pontes release. “It will give an important advantage to help it scale.”

An initial group of market participants and DLT operators has completed onboarding and is ready to use Pontes immediately, while additional participants have committed to connecting in coming months, the ECB said.

The Eurosystem is also pursuing its Appia initiative with Danmarks Nationalbank and public- and private-sector stakeholders, with the aim of producing a blueprint for an integrated DLT-based financial ecosystem by 2028, according to the Pontes release.