ECB Develops Blockchain-Centric Payment System for Central Bank Transactions

The European Central Bank (ECB) is developing a blockchain-based payment system that will enable financial institutions to settle transactions using central bank money, as announced on February 20.

This initiative is viewed as a potential advancement towards establishing a wholesale central bank digital currency (CBDC) and will accelerate the integration of blockchain technology within global finance.

European Central Bank Advances Blockchain-Enabled Settlements

In a press release, the ECB stated that its Governing Council has broadened its initiative to incorporate distributed ledger technology (DLT) into financial transactions settled in central bank money.

The bank is employing a dual approach to facilitate this transition, focusing on rapid implementation alongside long-term infrastructure development.

The ECB aims to establish a blockchain-based payment system that allows financial institutions to settle transactions in central bank money https://t.co/jcLGMSvuFq

— Bloomberg Markets (@markets) February 20, 2025

“This represents a significant contribution to enhancing the efficiency of European financial markets through innovation,” remarked ECB Executive Board member Piero Cipollone.

The first phase of the initiative involves creating an interoperability link between blockchain-based transactions and the existing TARGET Services platform, ensuring secure and efficient settlements using central bank money. The ECB plans to provide a detailed timeline for this implementation shortly.

The second phase concentrates on a more integrated long-term solution that will support a broader array of DLT-based transactions, including foreign exchange settlements and other international financial operations.

The ECB emphasized that while it remains committed to exploring new technologies, the integrity and efficiency of the financial system will continue to be a top priority.

The bank intends to collaborate closely with both public and private stakeholders to assess the potential impact of blockchain and other innovations.

“We are embracing innovation without compromising on safety and stability. Our approach carefully considers the Eurosystem’s objective of achieving a more harmonized and integrated European financial ecosystem,” stated Cipollone.

Lagarde Remains Firm Against Bitcoin Reserves as ECB Adopts Blockchain

As Europe investigates these digital asset solutions, it encounters competition from dollar-backed stablecoins.

In January, the ECB highlighted the necessity for blockchain-based payment innovations, particularly a digital euro. Despite the adoption of blockchain for settlements, the ECB remains cautious regarding broader cryptocurrency adoption.

ECB President Christine Lagarde has rejected Bitcoin as a reserve asset, citing concerns over liquidity and security. #ECB #Blockchain #BitcoinReserve https://t.co/HSlApHCjfg

— Cryptonews.com (@cryptonews) January 30, 2025

President Christine Lagarde has dismissed Bitcoin as a treasury asset, pointing to its volatility and associations with financial crimes.

This initiative aligns with the ECB’s efforts to foster a more integrated European digital asset market. It builds on research conducted from May to November 2024, which involved 64 participants, including central banks, financial institutions, and blockchain platform operators.

These trials included actual central bank settlements, paving the way for expansion.

The ECB’s Governing Council has also called for a digital capital markets union to enhance the growth of European digital assets.

At a press conference, Lagarde reiterated her opposition to Bitcoin as an ECB reserve asset, stating:

“Reserves must be liquid, secure, and free from money laundering risks.”

Czech National Bank governor @MICHLiq_ has proposed studying Bitcoin as part of the bank’s reserve management strategy. #Bitcoin $BTC #CentralBanks https://t.co/TBNHsVOsJk

— Cryptonews.com (@cryptonews) February 19, 2025

Her remarks followed Czech National Bank Governor Ales Michl’s suggestion that Bitcoin was being discussed as a diversification tool but had not been formally considered.

Lagarde firmly stated that no European central bank under ECB jurisdiction would hold Bitcoin in reserves.

This stance contrasts with Federal Reserve Chair Jerome Powell’s position. Powell recently indicated that U.S. banks could serve crypto clients if risks are managed appropriately and called for clearer crypto regulations, suggesting a more flexible approach than that of Europe.

Looking ahead, while Europe’s acceptance of Bitcoin remains uncertain, this new blockchain-based payment system may lead to a recognition of its technical capabilities, potentially prompting adoption.

Some European nations are already moving towards recognition, and they may later seek to compete with American countries.

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