The document summarizes a presentation by Dirk Bullmann from the European Central Bank on central banks and distributed ledger technologies. It discusses how DLT could potentially impact central bank roles like collateral, cash, securities and operations oversight. It outlines the ECB's experimental work with DLT including cooperation with the Bank of Japan and an ECB test lab. Key findings from reports on using DLT for payments and securities are presented. The ECB's stance is that current DLT solutions do not meet requirements for replacing existing market infrastructure but it will continue exploring technologies.

1. R3 CordaCon
London, 13 September 2018
Central banks and
distributed ledger
technologies
Dirk Bullmann
Adviser, Directorate General
Market Infrastructure and Payments
European Central Bank

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The future has landed
Times of
accelerated change
Need to embrace
innovation
-DLT-
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Digital/virtual currencies,
crypto assets / tokens
Blockchain / Distributed
Ledger Technologies
Infrastructure Asset
Important to distinguish infrastructure from asset
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Blockchain / Distributed ledger technologies:
Potential impact on central bank’s roles
Collateral
Cash
Securities
Operations
Oversight
Catalyst
Financial
integration
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Hammer looking for a nail?
Eurosystem operates two of the world’s largest market infrastructure services (TARGET2 and
TARGET2-Securities) and has launched new projects (e.g. TARGET Instant Payments Settlement).
Technological innovation such as DLT has the potential to profoundly impact the financial market we
know today. But any new technology-based market infrastructure service needs to be mature enough
to meet high requirements in terms of safety and efficiency.
Against this background, the ECB cannot, at this stage, consider basing its market infrastructure on a
DLT solution.
The ECB will continue to explore, analyse and test new technologies. In doing so we will ensure that
tomorrow’s market infrastructure not only is efficient and innovative but also remains safe and
resilient.
DLT
ECB stance
https://www.ecb.europa.eu/pub/annual/special-features/2016/html/index.en.html
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Work within EU central bank community:
•DLT learning tool for EU central banks established
in March 2018 (first version based on Hyperledger)
•World’s first DLT network between a larger group of
central banks
•First hackathon with the EU central bank community
conducted in April 2018 to explore possible use cases
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ECB test lab
Experimental work with blockchain / DLT
(to date: Corda, Hyperledger, Ethereum, elements)
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Bank of Japan/ECB cooperation:
Objective: deepen understanding of DLT
In-depth experiments on whether specific liquidity-saving
mechanisms of RTGS could be run on DLT (Hyperledger)
Not geared towards replacing existing central
bank services with DLT-based solutions
Project “Stella” launched in December 2016
Stella 1:09/2017
Conceptual analysis and experiments on how Delivery-versus-
Payment could be conceptually designed and operated on DLT
(Corda, Hyperledger, elements)
Stella 2:
ECB test lab
03/2018
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Main findings
Current performance needs of RTGS system
(ca. 10-70 transactions per second) can be
processed without difficulty
Liquidity-saving mechanisms (smart contract)
not a major factor for latency (adding 0.01-0.02
seconds)
Payments
DLT performance is affected by distance
between nodes
Report 1
DLT solutions were found to be resilient to the
failure of individual network nodes
Validating nodes mostly recovered in less
than 30 seconds
availabilityperformance
DLT solutions were found to be resilient to
incorrectly formatted messages; latency
remained between 0.5 and 1 second
https://www.ecb.europa.eu/pub/pdf/other/ecb.stella_project_report_september_2017.pdf
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Securities
Report 2
DLT offers a new approach for
achieving DvP between ledgers,
which does not require any
connection between ledgers
(cross-chain atomic swaps)
This new interoperability approach
however entails complexities
(e.g. higher liquidity needs) and
possibly also additional risks
https://www.ecb.europa.eu/pub/pdf/other/stella_project_report_march_2018.pdf
Main findings
Securities
Report 2
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Assessing impact of new technologies on financial market
integration efforts in Europe
Work conducted by market-
led FinTech Task Force;
first findings published in
September 2017;
ECB contributes in its catalyst
function
ECB’s FinTech market group
https://www.ecb.europa.eu/paym/intro/governance/shared/pdf/201709_dlt_impact_on_harmonisation_and_integration.pdf
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ECB’s stance on “crypto assets”
https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf
https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemesen.pdf
Chart source: xe.com
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ECB’s stance on “crypto assets”
Areas that require particular attention:
•facilitators (exchanges, wallet-providers and brokers)
•financial market infrastructures
•the banking sector
Impact of virtual currencies / crypto assets?
1. Size of virtual currency market
2. Links to real economy
Labels “currency” and
“money” are misnomers
https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp180208.en.html
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Thank you!
Dirk Bullmann
dirk.bullmann@ecb.europe.eu
www.ecb.europa.eu/paym/
youtube.com/ecbeuro
www.twitter.com/target_ecb