European Central Bank Proposes Unified Digital Ledger

According to Cointelegraph, a European Central Bank (ECB) official has proposed the creation of a 'European ledger,' a unified blockchain platform for digital assets and money across the continent. This initiative aims to enhance efficiency and synergy within European digital markets. ECB executive board member Piero Cipollone highlighted the fragmentation and unharmonized legislation in Europe’s traditional capital markets, suggesting that a digital capital markets union could address these issues. Cipollone noted that over 60% of banks in the European Union are exploring or experimenting with distributed ledger technology (DLT), with another 22% already utilizing it. However, he emphasized that while DLT offers opportunities for financial integration, it does not guarantee it. He pointed out that non-interoperable technological ecosystems shaped by different national regulatory regimes have created isolated pools of asset liquidity, further entrenching fragmentation. Currently, DLT is primarily used for issuing assets, but extending its use to negotiation, settlement, and custody on a single platform could reduce costs and enable round-the-clock operations. Cipollone stated that investors would benefit from the broader use of DLT, but central banks also have a vested interest in ensuring that central bank money remains a cornerstone of stability in a token-based capital market. The concept of a unified ledger, where cash and assets coexist on the same platform, has garnered support from the Bank for International Settlements and various central banks. Institutions like SWIFT and JPMorgan have also shown interest. However, Cipollone cautioned that while a European ledger could promote financial stability and integration, it might also stifle innovation, particularly for specific use cases. He suggested that traditional finance might benefit more from the flexibility offered by competing DLT platforms. As these discussions continue, the ECB is exploring ways to settle DLT transactions with central bank money, despite concerns that relying on existing interoperability solutions in the long term could perpetuate inefficiencies.