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Europe takes a step towards the financial infrastructure of the future
The European Central Bank is working to establish a complementary and more integrated digital financial ecosystem between banks, based on distributed ledger technology (DLT). Denmark is closely linked to the European financial infrastructure through Danmarks Nationalbank’s participation in TARGET Services. Danmarks Nationalbank therefore takes part in the development of new solutions, including DLT‑based settlement models, which over time may enable transactions in Danish kroner to be settled within a DLT infrastructure.
European interbank settlement using new technology
DLT is gaining traction among global financial institutions and has the potential to change the way financial assets are traded and settled.1 The European Central Bank is exploring the use of DLT in financial market infrastructures. The focus is on settlement of transactions between financial institutions in central bank money and is therefore not aimed at households or non‑financial corporations.
One of the objectives is to examine how new technology can support a more integrated and efficient European infrastructure, while maintaining key considerations related to security, stability and access to central bank money in the settlement of systemic transactions.2 A well‑integrated and efficient European infrastructure will help strengthen strategic autonomy by supporting a competitive and resilient European DLT‑based market.
DLT is a technology in which the database, which records participants’ transactions and asset holdings, is distributed among several participants rather than maintained by a single central entity. Several banks and financial institutions highlight the technology’s potential to enhance parts of capital markets and streamline processes.
In the short term, it has been decided to develop a solution referred to as Pontes, which will establish a link between market‑developed DLT platforms with tokenised financial assets and the Eurosystem’s TARGET Services. This will allow the financial sector to develop and scale DLT solutions with access to settlement in central bank money. The solution is expected to be launched in the third quarter of 2026 and will be expanded over time with new functionalities, including the possibility of connecting Danish kroner.
In parallel, analytical work is being carried out under the initiative known as Appia, which aims to pave the way for a DLT‑based ecosystem for financial markets in the longer term. The Appia work is expected to produce a blueprint in 2028 containing concrete designs for how an efficient tokenised ecosystem and new innovative market structures can be developed. At the same time, it will outline the role of the Eurosystem in a future EU capital market infrastructure that can complement TARGET Services. The Appia project covers the euro and other currencies made available by the respective central banks in TARGET, including the Danish krone.
The ECB recently published the report Appia – paving the way towards a future-ready, integrated financial ecosystem leveraging tokenisation and DLT. The report describes the Eurosystem’s initial long-term strategy to develop a future DLT-based financial infrastructure in Europe.3
Danmarks Nationalbank takes part in shaping the future infrastructure
Danmarks Nationalbank participates in the pan‑European work on TARGET Services and currently settles payments between banks as well as financial assets, including government and mortgage bonds. Any future expansion of the Danish settlement infrastructure, including considerations related to DLT‑based systems, is therefore carried out in close cooperation with the European Central Bank.
Specifically, Danmarks Nationalbank is involved in both Pontes and Appia with a view to ensuring that future solutions can also benefit Danish market participants and that Danish perspectives are incorporated into the European development process at an early stage. A key aspect is to ensure that future solutions take account of Danish needs, including the ability to use Danish kroner.
Potential implications for the Danish market
Developments in tokenisation and DLT are progressing rapidly and may have a significant impact on the future financial market infrastructure, including in Denmark. Over time, these developments may lead to more efficient and integrated financial markets and greater flexibility in the use of securities as collateral.
A central element of this development is the possibility of settling DLT‑based transactions in central bank money in Danish kroner. Central bank money underpins stability and confidence in the financial system, and regardless of the use of new technology, it remains essential that central bank money in Danish kroner continues to be the primary means of settlement in Danish interbank markets.
At the same time, uncertainty remains regarding technological developments, the pace of implementation and the final design of future solutions. Nevertheless, the potential is significant, and early insight and engagement can give Danish market participants a stronger starting point for adapting business models, systems and skills.
On this basis, Danmarks Nationalbank will engage in dialogue with Danish financial market participants. Ongoing involvement from the Danish financial sector will therefore be important in contributing market insight at a stage when the architecture and standards for the future European infrastructure are being defined.