ECB Readies Tokenized Securities Purchases Using New Pontes Settlement Service

The European Central Bank is laying the groundwork to invest a small slice of its own funds in tokenized securities, with transactions to settle in central bank money via Pontes, a newly introduced Eurosystem service. In a statement released Monday, the ECB said the pilot purchases are intended to give the institution hands-on experience as an investor and to deepen internal capabilities in using distributed ledger technology in financial markets. Direct investment would expose the bank to the full investment process, spanning trade execution, settlement, systems, and portfolio management. The ECB said the first purchases will target tokenized, euro-denominated securities issued by euro area governments, public agencies, and European supranational institutions. The instruments are conventional securities such as bonds, but issued or recorded on a distributed ledger. Funding will come from the ECB's own-funds portfolio, a non-monetary-policy portfolio that generates income to help cover operating costs unrelated to its supervisory responsibilities. The ECB did not disclose how much it plans to invest or when buying will begin. The Executive Board will set the operational parameters and timeline after preparatory work is completed, factoring in developments in tokenized issuance and the broader tokenized financial ecosystem in Europe. Pontes forms part of a Eurosystem push to adapt central bank money for the digital era. It will run alongside Appia, an initiative aimed at developing a blueprint for a tokenized financial ecosystem in Europe. The ECB said Pontes will help market participants—including those engaged in exploratory work—enhance their offerings while preserving the anchoring role of central bank money. According to the ECB, Pontes consolidates three tested systems into a single service. It will enable settlement either with cash tokens or via the Eurosystem's T2 payment system. Its HashLink protocol is designed to synchronize asset delivery and payment, and automated processing is expected to reduce manual workload. Similar initiatives are underway across the public and private sectors. In May, JPMorgan filed for a tokenized Ethereum money market fund. In June, New York Life Investment Management launched a tokenized bond fund. Earlier this month, India began a pilot to issue and settle tokenized corporate bonds using its wholesale digital rupee.