ECB trials in review: The French perspective
18 March 2025
In the second instalment of this two-part series, Daniel Tison invites Banque de France and BNP Paribas to join the discussion on the recently completed ECB DLT trials and experiments
Image: stock.adobe.com/Eric Isselée
Three main ingredients
The Eurosystem, comprising the European Central Bank (ECB) and EU national central banks, provided three interoperability-type solutions for its distributed ledger technology (DLT) experimentation programme, running from May to November 2024, commonly known as the ‘ECB trials’.
DL3S, the full-DLT interoperability solution, developed by the Banque de France, allowed 40 entities from nine jurisdictions to settle wholesale financial transactions in central bank money, in a token-based account held on a DLT platform provided by the Eurosystem.
Five entities from four jurisdictions tested the TARGET Instant Payment Settlement (TIPS) Hash-Link of Banca d’Italia. This enabled the settlement of wholesale financial transactions in central bank money in accounts on a TIPS-like platform set up for the Eurosystem. The solution tested interoperability between a market DLT platform and a central bank-operated payment system — a copy of TIPS — via an API gateway.
Last but not least, Deutsche Budesbank’s Trigger Solution, used by 25 entities from five jurisdictions, consisted of a DLT infrastructure acting as a technical bridge between T2 and market DLT platforms.
Natacha Dezert, blockchain and digital assets programme manager for Securities Services at BNP Paribas, comments: “The programme was a great opportunity for industry collaboration with various market participants getting together to build and work on relevant use cases, as well as a great opportunity to further collaborate with our clients and better understand their needs and expectations regarding digital assets.”
BNP Paribas was the only bank to test all three solutions, with six trials and four experiments conducted throughout the exploratory work. This included real transactions with Neobonds, BNP Paribas’ private tokenisation platform using Canton blockchain, and test transactions with AssetFoundry, its Ethereum-based platform.
As both a market participant and DLT operator, the French multinational bank utilised its integrated and diversified model across business lines, including ALM Treasury, BNP Paribas Asset Management, FIC Official Institutions Coverage/FIC Investors Coverage, Global Markets, and Securities Services, to build expertise across multiple roles.
“It was extremely positive internally because we have worked on different use cases, covering the whole security lifecycle and intervening with various roles such as wallet manager, issuing and paying agent, custodian, and depositary bank,” adds Dezert.
“This allowed us to foster transversal collaboration and coordination across BNP Paribas’ entities and to engage many different teams across the group. It was a great learning experience to strengthen our knowledge and expertise at many levels — operational, legal, risk, compliance, and more.”
One combined solution
As one of the three participating central banks, Banque de France conducted 19 trials and experiments throughout the exploratory work, while providing an interoperability solution for the exploratory work organised by the ECB.
Audrey Metzger, director for innovation and financial market infrastructures at Banque de France, explains that the French central bank started with similar experiments as first in 2020 — three years before the Eurosystem project was announced.
“We had a lot of requests from the market players explaining to us that they wanted to explore a way to make transactions on digital assets or tokenised, and that it would be much more efficient if the cash leg could be central bank money, and we realised that it is very promising,” says Metzger.
Her deputy Adeline Bachellerie adds that working together with other market participants across Europe is particularly important in the geopolitical context and with the EU’s objective of the Saving and Investment Union.
“It’s important to see what history teaches us, and the last financial crisis was important in that respect,” she notes. “Central bank money is at the heart of the financial system as the most liquid asset without any risks, which allows a secure financial transaction.”
Central bank digital currency (CBCD) was one of the three digital cash mechanisms tested during the ECB trials, along with commercial bank money and tokenised deposits, explains Matthieu Herbeau, CBDC experimentation manager at Banque de France.
“The appetite for the market is clearly for wholesale CBDC or central bank money because it is the safest settlement asset,” he states. “Nevertheless, there are initiatives for tokenised deposits and commercial bank money on the ledger. The idea, of course, is to make sure that all three can coexist, and we support the coexistence of those assets by providing the right infrastructure and the right level of control.”
Herbeau continues by describing use cases where transactions between participants in commercial bank money were ultimately settled in central bank money.
“We also had some use cases with tokenised deposits, which is quite encouraging, and we look forward to more experiments and trials around the coexistence of the settlement assets,” he adds.
Following this train of thought, Bachellerie says: “We already have a coexistence between commercial bank money and central bank money, and the idea with DLT is, of course, to maintain this coexistence, but maybe to go further.”
She explains the vision of a European shared ledger, which would bring together token versions of central bank money, commercial bank money, and other digital assets on a shared, programmable, DLT platform, on which market participants could provide their services.
Metzger shares the sentiment, adding: “Both types of cash could be taken on board by this new, combined solution, which may help to avoid any additional fragmentation. Additional fragmentation is something we should absolutely avoid because it would go against our goal, which is to have a union for saving and investment inventory markets in Europe.”
Keeping the momentum
The first phase of the exploratory work, running from May, focused on the initial testing and feasibility of DLT for issuing and settling tokenised securities. Participants worked on integrating DLT platforms with existing systems, testing basic functionality, and assessing the viability of the three cash mechanisms.
“The objective was to prepare ourselves from a technical and functional perspective across the organisation in order to answer our clients’ requests to accompany them as a service provider in their trials during the second wave,” explains Dezert.
Commenced in July, Wave 2 explored advanced use cases, particularly in collateral management and margining. Trials in this phase demonstrated how DLT could enable real-time, 24/7 access to tokenised assets, significantly improving liquidity management and operational efficiency.
This kicked off with BNP Paribas accompanying the Republic of Slovenia in the first digital bond issuance for a Eurozone sovereign, where the French bank provided the tokenisation platform while also acting as the arranger, dealer, and paying agent for the issuer, and as transaction and wallet manager for the investors on both the securities and cash DLTs.
In November, France issued its first digitally native note (DNN) in bearer form as part of the trials. The DNN of €100 million was issued by Caisse des Dépôts, a public financial institution, using Euroclear’s Digital Financial Market Infrastructure (D-FMI), and settled through BdF’s DL3S platform for digital currency, with BNP Paribas' Securities Services business acting as the issuing and paying agent.
Along with HSBC Continental Europe and NatWest Markets, BNP Paribas arranged a €100 million three-year digital bond settled with an experimental mechanism of wholesale central bank digital currency (wCBDC) in the same month. According to the EIB, a key feature of wCBDC is its ability to enable atomic settlement, where cash and ownership of tokenised securities are exchanged simultaneously, reducing counterparty risks.
Among the many tested use cases, the tokenisation of cash and securities for collateral and margining stood out as a “game changer”, according to Barnaby Nelson, CEO of the ValueExchange — which published a comprehensive report on the ECB trials.
The key advantage of this mechanism is 24/7 cash availability, which reduces idle cash and removes the need to pre-position funds before central bank or market infrastructure cutoffs. Meanwhile, the ability to move securities just in time for margin calls helps minimise over-provisioning and unnecessary buffering.
Nelson explains: "If you put tokenisation in place, you very quickly get to a point where intraday repos and intraday activity are completely okay. It’s the operational processes that block intraday lending at the moment. If you get rid of those blockages, you can move to intraday financing, which opens up a huge market.
“And then if clearing houses and collateral takers are completely comfortable that they're going to get their collateral at a specific moment in time with complete security, then they're okay to move to real-time margining. The only reason they do end-of-day margining today is because the market can't keep up with anything faster.”
However, he adds that because the trials have ended, the digital central bank cash has been switched off and become nonviable as a result. In addition, the ECB currently does not recognise tokenised securities as collateral, which creates another barrier.
Dezert believes that it is now important not to lose the momentum created by the successful completion of the ECB trials, with the majority of participants expressing their appetite to continue the exploratory work in 2025.
She says: “As we have tested all three of the central banks’ solutions and built our connectivity around them, we can understand them from a technical and functional perspective, and we are now in a good position to contribute to the ongoing discussions at the Eurosystem level to design the future solution.”
Bachelleries echoes this statement: “We have gained momentum with the market players, and in particular in the geopolitical context, it will be important for Europe to be able to offer its own solutions.”
The next step: Unlocking the value of blockchain
As the securities finance industry continues to evolve, the results of the ECB DLT trials provide a glimpse of a more efficient, interconnected future. The question now is not whether DLT will become a part of the financial landscape, but how quickly it will transform core market operations.
“The whole thing about the DLT journey is that we learn as we go,” says Nelson. “You take one step forward, and new risks present themselves. You manage those risks, and then you move forward again.”
On that note, Metzger states: “The direction that we have chosen is to use our experiments and trials to learn by doing, helping us to better understand what we can do, what these technologies can do, what are the will and expectation from the market players, and with all those aspects, we are progressively moving through this challenge.”
Nelson sees a large potential in the tokenisation of cash and securities for collateral and margining, adding: “The numbers are so compelling that it would be very hard to see why in the next five to eight years this does not become the way of exchanging collateral.”
In contrast, Herbeau wants to pay more attention to repo, but acknowledges that there are issues with the eligibility of digital assets for such operations.
“This is still work in progress because repo’s digital assets tend to be of a nature that needs to be thoroughly analysed,” he explains.
Dezert anticipates that there will be a long transition period where traditional and digital assets will coexist, adding complexity to the framework.
“It will be our focus during this transition period to provide a seamless operating model to our clients across both types of assets to facilitate their integration,” she says. “It will also be important from now on to address the fragmentation of the digital asset ecosystem with more industry collaboration to build DLT infrastructures with critical mass and liquidity, allowing the digital capital markets to further develop and the full value of blockchain to be unlocked.”
Building on the exploratory work, the ECB has decided to expand its initiative to settle DLT-based transactions in central bank money by developing a platform that is interoperable with existing infrastructures.
Following that, the Eurosystem will look into a more integrated, long-term solution, which will also allow international operations, such as foreign exchange settlement.
According to the ECB, this initiative will contribute to establishing an integrated European market for digital assets.
Piero Cipollone, executive board member at ECB, who oversees the initiative, says: “We are embracing innovation without compromising on safety and stability.
“This is an important contribution to enhancing European financial market efficiency through innovation. Our approach will pay due attention to the Eurosystem’s goal of achieving a more harmonised and integrated European financial ecosystem.”
The Eurosystem, comprising the European Central Bank (ECB) and EU national central banks, provided three interoperability-type solutions for its distributed ledger technology (DLT) experimentation programme, running from May to November 2024, commonly known as the ‘ECB trials’.
DL3S, the full-DLT interoperability solution, developed by the Banque de France, allowed 40 entities from nine jurisdictions to settle wholesale financial transactions in central bank money, in a token-based account held on a DLT platform provided by the Eurosystem.
Five entities from four jurisdictions tested the TARGET Instant Payment Settlement (TIPS) Hash-Link of Banca d’Italia. This enabled the settlement of wholesale financial transactions in central bank money in accounts on a TIPS-like platform set up for the Eurosystem. The solution tested interoperability between a market DLT platform and a central bank-operated payment system — a copy of TIPS — via an API gateway.
Last but not least, Deutsche Budesbank’s Trigger Solution, used by 25 entities from five jurisdictions, consisted of a DLT infrastructure acting as a technical bridge between T2 and market DLT platforms.
Natacha Dezert, blockchain and digital assets programme manager for Securities Services at BNP Paribas, comments: “The programme was a great opportunity for industry collaboration with various market participants getting together to build and work on relevant use cases, as well as a great opportunity to further collaborate with our clients and better understand their needs and expectations regarding digital assets.”
BNP Paribas was the only bank to test all three solutions, with six trials and four experiments conducted throughout the exploratory work. This included real transactions with Neobonds, BNP Paribas’ private tokenisation platform using Canton blockchain, and test transactions with AssetFoundry, its Ethereum-based platform.
As both a market participant and DLT operator, the French multinational bank utilised its integrated and diversified model across business lines, including ALM Treasury, BNP Paribas Asset Management, FIC Official Institutions Coverage/FIC Investors Coverage, Global Markets, and Securities Services, to build expertise across multiple roles.
“It was extremely positive internally because we have worked on different use cases, covering the whole security lifecycle and intervening with various roles such as wallet manager, issuing and paying agent, custodian, and depositary bank,” adds Dezert.
“This allowed us to foster transversal collaboration and coordination across BNP Paribas’ entities and to engage many different teams across the group. It was a great learning experience to strengthen our knowledge and expertise at many levels — operational, legal, risk, compliance, and more.”
One combined solution
As one of the three participating central banks, Banque de France conducted 19 trials and experiments throughout the exploratory work, while providing an interoperability solution for the exploratory work organised by the ECB.
Audrey Metzger, director for innovation and financial market infrastructures at Banque de France, explains that the French central bank started with similar experiments as first in 2020 — three years before the Eurosystem project was announced.
“We had a lot of requests from the market players explaining to us that they wanted to explore a way to make transactions on digital assets or tokenised, and that it would be much more efficient if the cash leg could be central bank money, and we realised that it is very promising,” says Metzger.
Her deputy Adeline Bachellerie adds that working together with other market participants across Europe is particularly important in the geopolitical context and with the EU’s objective of the Saving and Investment Union.
“It’s important to see what history teaches us, and the last financial crisis was important in that respect,” she notes. “Central bank money is at the heart of the financial system as the most liquid asset without any risks, which allows a secure financial transaction.”
Central bank digital currency (CBCD) was one of the three digital cash mechanisms tested during the ECB trials, along with commercial bank money and tokenised deposits, explains Matthieu Herbeau, CBDC experimentation manager at Banque de France.
“The appetite for the market is clearly for wholesale CBDC or central bank money because it is the safest settlement asset,” he states. “Nevertheless, there are initiatives for tokenised deposits and commercial bank money on the ledger. The idea, of course, is to make sure that all three can coexist, and we support the coexistence of those assets by providing the right infrastructure and the right level of control.”
Herbeau continues by describing use cases where transactions between participants in commercial bank money were ultimately settled in central bank money.
“We also had some use cases with tokenised deposits, which is quite encouraging, and we look forward to more experiments and trials around the coexistence of the settlement assets,” he adds.
Following this train of thought, Bachellerie says: “We already have a coexistence between commercial bank money and central bank money, and the idea with DLT is, of course, to maintain this coexistence, but maybe to go further.”
She explains the vision of a European shared ledger, which would bring together token versions of central bank money, commercial bank money, and other digital assets on a shared, programmable, DLT platform, on which market participants could provide their services.
Metzger shares the sentiment, adding: “Both types of cash could be taken on board by this new, combined solution, which may help to avoid any additional fragmentation. Additional fragmentation is something we should absolutely avoid because it would go against our goal, which is to have a union for saving and investment inventory markets in Europe.”
Keeping the momentum
The first phase of the exploratory work, running from May, focused on the initial testing and feasibility of DLT for issuing and settling tokenised securities. Participants worked on integrating DLT platforms with existing systems, testing basic functionality, and assessing the viability of the three cash mechanisms.
“The objective was to prepare ourselves from a technical and functional perspective across the organisation in order to answer our clients’ requests to accompany them as a service provider in their trials during the second wave,” explains Dezert.
Commenced in July, Wave 2 explored advanced use cases, particularly in collateral management and margining. Trials in this phase demonstrated how DLT could enable real-time, 24/7 access to tokenised assets, significantly improving liquidity management and operational efficiency.
This kicked off with BNP Paribas accompanying the Republic of Slovenia in the first digital bond issuance for a Eurozone sovereign, where the French bank provided the tokenisation platform while also acting as the arranger, dealer, and paying agent for the issuer, and as transaction and wallet manager for the investors on both the securities and cash DLTs.
In November, France issued its first digitally native note (DNN) in bearer form as part of the trials. The DNN of €100 million was issued by Caisse des Dépôts, a public financial institution, using Euroclear’s Digital Financial Market Infrastructure (D-FMI), and settled through BdF’s DL3S platform for digital currency, with BNP Paribas' Securities Services business acting as the issuing and paying agent.
Along with HSBC Continental Europe and NatWest Markets, BNP Paribas arranged a €100 million three-year digital bond settled with an experimental mechanism of wholesale central bank digital currency (wCBDC) in the same month. According to the EIB, a key feature of wCBDC is its ability to enable atomic settlement, where cash and ownership of tokenised securities are exchanged simultaneously, reducing counterparty risks.
Among the many tested use cases, the tokenisation of cash and securities for collateral and margining stood out as a “game changer”, according to Barnaby Nelson, CEO of the ValueExchange — which published a comprehensive report on the ECB trials.
The key advantage of this mechanism is 24/7 cash availability, which reduces idle cash and removes the need to pre-position funds before central bank or market infrastructure cutoffs. Meanwhile, the ability to move securities just in time for margin calls helps minimise over-provisioning and unnecessary buffering.
Nelson explains: "If you put tokenisation in place, you very quickly get to a point where intraday repos and intraday activity are completely okay. It’s the operational processes that block intraday lending at the moment. If you get rid of those blockages, you can move to intraday financing, which opens up a huge market.
“And then if clearing houses and collateral takers are completely comfortable that they're going to get their collateral at a specific moment in time with complete security, then they're okay to move to real-time margining. The only reason they do end-of-day margining today is because the market can't keep up with anything faster.”
However, he adds that because the trials have ended, the digital central bank cash has been switched off and become nonviable as a result. In addition, the ECB currently does not recognise tokenised securities as collateral, which creates another barrier.
Dezert believes that it is now important not to lose the momentum created by the successful completion of the ECB trials, with the majority of participants expressing their appetite to continue the exploratory work in 2025.
She says: “As we have tested all three of the central banks’ solutions and built our connectivity around them, we can understand them from a technical and functional perspective, and we are now in a good position to contribute to the ongoing discussions at the Eurosystem level to design the future solution.”
Bachelleries echoes this statement: “We have gained momentum with the market players, and in particular in the geopolitical context, it will be important for Europe to be able to offer its own solutions.”
The next step: Unlocking the value of blockchain
As the securities finance industry continues to evolve, the results of the ECB DLT trials provide a glimpse of a more efficient, interconnected future. The question now is not whether DLT will become a part of the financial landscape, but how quickly it will transform core market operations.
“The whole thing about the DLT journey is that we learn as we go,” says Nelson. “You take one step forward, and new risks present themselves. You manage those risks, and then you move forward again.”
On that note, Metzger states: “The direction that we have chosen is to use our experiments and trials to learn by doing, helping us to better understand what we can do, what these technologies can do, what are the will and expectation from the market players, and with all those aspects, we are progressively moving through this challenge.”
Nelson sees a large potential in the tokenisation of cash and securities for collateral and margining, adding: “The numbers are so compelling that it would be very hard to see why in the next five to eight years this does not become the way of exchanging collateral.”
In contrast, Herbeau wants to pay more attention to repo, but acknowledges that there are issues with the eligibility of digital assets for such operations.
“This is still work in progress because repo’s digital assets tend to be of a nature that needs to be thoroughly analysed,” he explains.
Dezert anticipates that there will be a long transition period where traditional and digital assets will coexist, adding complexity to the framework.
“It will be our focus during this transition period to provide a seamless operating model to our clients across both types of assets to facilitate their integration,” she says. “It will also be important from now on to address the fragmentation of the digital asset ecosystem with more industry collaboration to build DLT infrastructures with critical mass and liquidity, allowing the digital capital markets to further develop and the full value of blockchain to be unlocked.”
Building on the exploratory work, the ECB has decided to expand its initiative to settle DLT-based transactions in central bank money by developing a platform that is interoperable with existing infrastructures.
Following that, the Eurosystem will look into a more integrated, long-term solution, which will also allow international operations, such as foreign exchange settlement.
According to the ECB, this initiative will contribute to establishing an integrated European market for digital assets.
Piero Cipollone, executive board member at ECB, who oversees the initiative, says: “We are embracing innovation without compromising on safety and stability.
“This is an important contribution to enhancing European financial market efficiency through innovation. Our approach will pay due attention to the Eurosystem’s goal of achieving a more harmonised and integrated European financial ecosystem.”
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