With ECB infrastructure on the launchpad, asset interoperability, settlement finality frameworks and cash solutions need to move in lockstep, says the wholesale markets body.
The window for getting Europe’s DLT policy foundations right is now. As the ECB prepares to go live with Pontes — its bridge between commercial DLT platforms and TARGET services — AFME is calling for coordinated and urgent action to ensure the legal and policy architecture keeps pace with the infrastructure being built beneath it.
In a new paper, the wholesale markets body sets out its vision for a future European DLT capital market — network-based, market-driven and interoperable — and warns that without the right foundations, the opportunity will fragment. ”With the right policy foundations, DLT can help create more efficient, resilient and competitive European capital markets, while fully preserving financial stability.”
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At the top of AFME’s priority list are recognition of asset interoperability — the transferability and control mechanisms such as locking, minting and token wrapping that DLT platforms provide — and operational settlement finality for delivery-versus-payment and payment-versus-payment transactions. Standards at asset, token and protocol layers must be developed through public-private collaboration to prevent fragmentation before it takes hold.
On cash and collateral, AFME calls for Pontes to be operationalised swiftly alongside commercial bank money solutions, and for authorities to immediately enable the use of DLT-based assets as collateral in central bank credit operations — clarifying the eligibility framework, recognising asset controls by non-CSD platforms, and integrating those platforms into the collateral mobilisation architecture. Longer term, AFME envisages public-private cash ledgers hosting central bank money, commercial bank money and stablecoins on a cross-currency basis, minimising liquidity fragmentation as the market scales.
