Project Pontes: why a trigger solution is still needed alongside wCBDC
Infrastructure
Project Pontes, launching in September, introduces two distinct settlement mechanisms for DLT transactions within the Eurosystem. The framework offers a wholesale CBDC-like cash token and a trigger solution that connects DLT platforms to the existing TARGET2 (T2) payment system. While the cash tokens allow for intraday circulation between banks, they currently lack legal settlement finality because they function as proxies for central bank money rather than direct wCBDC. Settlement finality is only achieved when tokens are burned and funds are defunded back to the T2 account, a process currently automated only at the end of the business day. This limitation makes the trigger solution a more attractive option for institutions requiring immediate, irreversible settlement. The European Central Bank has indicated that a technical upgrade to address these finality issues for DLT-based cash tokens is expected by mid-2027. This development highlights the ongoing regulatory and technical challenges in bridging traditional central bank payment systems with emerging distributed ledger technologies.
Key points
- ▸Project Pontes launches in September with two settlement options: cash tokens and trigger solutions.
- ▸Current cash tokens lack legal settlement finality until end-of-day defunding to TARGET2.
- ▸ECB plans a technical upgrade by mid-2027 to address DLT-based settlement finality.
- ▸Trigger solutions remain preferred for institutions requiring immediate, irreversible transaction finality.
Background
Project Pontes is an initiative by the Eurosystem to explore and facilitate the settlement of DLT-based transactions using central bank money. It aims to bridge the gap between traditional payment infrastructures like TARGET2 and modern blockchain-based financial markets. By providing these settlement bridges, the Eurosystem seeks to ensure that tokenized assets can be traded safely and efficiently within a regulated environment.
Relevance
7.5/10