ECB launches Pontes and prepares to buy tokenized securities

The Eurosystem launched Pontes on Monday, giving banks a live route to settle tokenized assets in central-bank money. The ECB is simultaneously preparing to invest a small portion of its own funds in tokenized securities, with the purchases set to settle through Pontes. The move places the ECB both as a provider of the settlement infrastructure and as a prospective investor using it. Pontes connects distributed-ledger market platforms with the Eurosystem's existing TARGET settlement services. It allows tokenized securities transactions to settle using central-bank money. Deutsche Bank, Santander, Société Générale and the European Investment Bank are among the initial institutions to complete onboarding. DLT operators including Clearstream, Axiology, Cashlink and SWIAT have also onboarded. More institutions are expected to connect over the coming months. André Dragosch, Bitwise Europe head of research, described the system as effectively the "digital euro made available for banks." He said it allows financial institutions to settle tokenized transactions with one another while retaining central-bank money as the settlement asset. The Eurosystem's 2024 DLT trials found that public- and private-sector participants viewed access to central-bank money as critical to wider adoption. Pontes launched with a limited set of services. The system is expected to add functionality and longer operating hours over time. Full implementation is targeted for 2028. The ECB has not identified a completed live settlement since Monday's launch. Transaction activity will therefore be a measure of whether the infrastructure gains traction beyond institutions that have already connected. The ECB's planned investment program will give it direct exposure to the transaction lifecycle that it is asking financial institutions to adopt. Initial purchases will focus on euro-denominated tokenized securities issued by euro-area central governments, regional governments, agencies and European supranational institutions. The ECB said using Pontes will give it experience with trade execution, settlement, technology systems and portfolio management. The size of the tokenized allocation has not been disclosed. The ECB has also not said when purchases will begin. Its Executive Board will determine the size and timing after preparatory work is completed. The ECB's own-funds holdings were worth €23.1 billion at the end of 2025. Government debt accounted for 73% of that portfolio. The own funds are managed separately from monetary-policy portfolios. They generate income that helps finance the ECB's operating expenses. Their use would allow the ECB to test tokenized markets without turning the purchases into an interest-rate or quantitative-easing instrument. Pontes is separate from Europe's consumer-facing digital euro project. The ECB plans a 12-month retail pilot beginning in the second half of 2027. The pilot will involve 36 payment-service providers, merchants and central-bank staff. The ECB targets a potential first issuance in 2029, subject to adoption of the necessary legislation. The two projects are separate tracks for extending central-bank money into digital infrastructure. Dragosch also pointed to earlier discussions about whether public blockchains could eventually play a role in the digital euro. The Financial Times reported in 2025 that European officials were considering networks including Ethereum and Solana among possible technological options as concerns grew over the expansion of dollar-backed stablecoins. The ECB said at the time that it was examining centralized and decentralized technologies and had made no final decision. Pontes allows banks and securities platforms to connect tokenized issuance and trading infrastructure to central-bank settlement while the retail architecture remains unresolved. The Eurosystem is also expanding Pontes and developing Appia. Appia is intended to produce a blueprint for an integrated European DLT financial ecosystem by 2028. The next test for Pontes is transaction volume. Onboarded institutions must decide which tokenized securities and workflows to route through the system. Additional banks and market operators will also weigh connections over the coming months. The size, timing and type of the ECB's first purchases will provide another measure of whether Pontes develops from available infrastructure into a regularly used market.