The European Stability Mechanism issued a €1 billion bond based on distributed ledger technology on 26 October, maturing in April 2030 with a 3.375% coupon. It is the first supranational issuer in Europe to settle such an issue through the Eurosystem’s Pontes platform, in central bank money. The Bundesbank acted as issuing and paying agent, Clearstream operated the DLT infrastructure and settlement, and the cash leg settled through TARGET. The bond is expected to be listed in Luxembourg and accepted as Eurosystem collateral.

What it means: This is one of the most meaningful steps yet in digitising European capital markets, because it is not a small pilot but a real one-billion benchmark bond. The key point is that the cash leg settled in central bank money, not in a stablecoin or commercial bank deposits, through the Pontes bridge that links DLT platforms with Eurosystem payment systems. That is the model the ECB is promoting as Europe’s answer to US stablecoins for wholesale markets, alongside the digital euro for retail payments. Eligibility as collateral shows that digital securities are starting to be treated like traditional ones. For Greece, where the Public Debt Management Agency, banks and large companies issue bonds regularly, the effects will appear over the next few years: faster settlement, fewer intermediaries and possibly lower issuance costs. Greek custodians, the Athens exchange and banks should follow Pontes and its rules closely, so they are ready when digital issues become routine.

Read the original on Deutsche Bundesbank

Related service: Consulting

Related stories