The Eurosystem announced more settlement trials on wholesale distributed ledger technology (DLT) in July, after the first batch started testing in May.
The second group, consisting of 48 private companies and three central banks, will test both cross-border and payment-versus-payment (PvP) transactions.
There are 15 DLT operators participating, including major banks such as JP Morgan (NASDAQ: JPM), Goldman Sachs (NASDAQ: GS), HSBC (NASDAQ: HSBC), Euroclear and others. These all have their own DLT solutions.
The tests will include a mix of real payments with volume limits and simulations. The tests will involve domestic payments with tokenized deposits, as well as a variety of security settlement use cases, and the central banks of Germany, Italy and France will provide interoperability solutions.
Puzzle pieces coming together
The Eurosystem includes the European Central Bank (ECB) and the national central banks of Member States that do not use the euro as their currency. A number of them are also involved in other innovative projects of the Bank for International Settlements (BIS), such as Project Meridian FX.
It’s not hard to see the pieces of the puzzle coming together; Around the world, central banks are working with international financial institutions, private banks and other organizations to rebuild global financial health.
From mBridge, which directly enables cross-border settlements between central banks, to the aforementioned European DLT trials, to central bank digital currencies (CBDCs), legacy systems such as SWIFT and the complex web of correspondent banks that make the current settlement system work . is transformed in real time.
However, one piece of the puzzle is still missing. Some can already see it, but it will probably become more obvious as these pieces come together and don’t quite fit.
A scalable ledger that supports everything
Using different DLTs for different elements of the financial system is ultimately self-defeating. Loading the auditability of a single ledger negates much of the potential transparency, and introducing bridges to facilitate switching between ledgers introduces unnecessary security vulnerabilities.
What is needed is a single ledger that supports everything. So far, only the BSV Blockchain, which follows the original Bitcoin white paper, is sufficiently scalable with the necessary functionality to act as the world’s unifying ledger.
Systems like the DLTs that private banks push, and the private ledgers that central banks will use for settlements, may still exist. However, to be truly interoperable and seamless, they must act as private, permissioned networks on top of a single, infinitely scalable ledger.
This architecture would enable the privacy and limited accessibility that some systems require, while making them interoperable with each other and with other applications. It’s like the difference between the open internet and the various intranets that exist today.
This will all be realized in due course. May the tests, trials and pilot programs continue until then. The financial system is in dire need of transformation, and it’s great to see this happening.
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