EUROCLEAR "CMU and Innovation" Conference
3 October 2024
Opening address by Denis Beau, First Deputy Governor
What will tomorrow's post-trading industry look like
and what forms of cooperation will it deploy?
Ladies and gentlemen,
In a tougher and more fragmented world, an increasing body of analyses and reports are
identifying Europe's vulnerabilities - especially in the economic and financial sphere - and
proposing ways of remedying these by leveraging and consolidating our key competitive
advantages.
These levers include Europe's financial firepower, which is not currently commensurate with its
economic heft, even though it has to contend with major investment requirements for two
necessary transformations in the digital and climate spheres that hold immense promise for the
future.
From this perspective, the post-trading industry has a key role to play in harnessing these new
digital technologies and processes which are developing before our eyes and transforming our
financial system.
From my perspective as a central banker, tasked with overseeing the efficiency and security of
the post-trading infrastructures that are so crucial to the stability of our financial system, these
innovations constitute both opportunities and risks. Their deployment therefore raises strategic
and operational questions that we need to answer collectively if we are to ensure that tomorrow's
post-trading infrastructures safeguard the competitiveness and sovereignty of our financial
system, while maintaining the stability that the legislator has tasked us with preserving. This raises
the following two questions in particular:
What will the post-trading services industry look like in the wake of these transformations?
What path should we follow to transition to the post-trading environment of tomorrow, without
jeopardizing security and efficiency?
To help move the debate over the potential solutions forward, I would like to talk to you this
evening about how we at the Banque de France see both the development of our service offering
in terms of assets used to settle transactions and infrastructure that can help to shape the post-
trading environment of tomorrow, and the cooperation arrangements and priorities that need to
be established to ensure a smooth transition to this new environment.
I. The Eurosystem's changing service offering
To perform its financial stability mandate with regard to post-trading infrastructures, the
Eurosystem uses three instruments: the provision of services, supervision and boosting market
initiatives.
Within this toolbox, the provision of services has long played a key role. This has meant that
infrastructure services T2 and T2S and central bank money take centre-stage in the functioning
of our financial system for settling exchanges between intermediaries.
To preserve this central role, because of its benefits in terms of stability, in the face of the new
infrastructures and settlement assets that may emerge with the increasing use of tokenisation
and new digital technologies, our conviction at the Banque de France is that these services must
evolve to support and promote transformations in the post-trading ecosystem that will deliver
gains in efficiency and sovereignty, while preserving stability. This is why we have been engaged
for several years in an ambitious experimentation programme, both in-house and within the
Eurosystem.
A. In the short and medium term, extending the Eurosystem's range of services to meet
market needs and the challenge of European sovereignty
[Slide 2] TARGET services currently provide efficient settlement infrastructures capable of
covering a broad range of use cases. However, the growing importance of tokenisation and new
technologies mean that this offering needs to be adapted and extended to cater to emerging
market expectations. In the course of our experiments - both at national level and within the
Eurosystem - we have actively collaborated with a wide range of private players, whose firm
commitment has demonstrated their keen interest in these innovations, with a variety of objectives
in mind, such as lower costs, better integration of products in the market or expanding into cross-
border transactions.
In the light of past and current research, one approach would be to expand the service offering to
guarantee the availability of a settlement asset in central bank money covering the new use cases
related to the tokenisation of financial instruments, especially through the use of central bank
digital currency (CBDC). This approach would meet the immediate needs of the market while
safeguarding the role of central bank money as the predominant settlement asset for exchanges
between financial intermediaries.
Time will be of the essence when implementing this change. Without a strong enough signal,
there is a risk that non-European financial players will seize the initiative and impose their own
settlement solutions, especially given the advantage conferred by being the 'first-mover'. In
addition to using settlement assets that are less secure than central bank money, this could lead
the market to shift towards international financial centres offering advanced functionalities, to the
detriment of the European market. Consequently, the responsiveness of both public and private
players will be decisive, and the ability to rapidly deploy a given settlement solution - even one
that just satisfies immediate needs in the short term - will be critical.
This first step would pave the way for a more long-lasting and robust solution. This would not only
guarantee monetary sovereignty, it would also be a decisive factor in bolstering the euro's
international role.
B. In the long term, creating a European Unified Ledger to integrate tokenised financial
assets and settlements
[Slide 3] Looking beyond this short-term solution, we need to develop a longer-term vision: that
of a fully integrated European market structure capable of supporting the development of financial
markets over the coming decades. For this purpose, the concept of a Unified Ledger is a logical
way forward for the initial CBDC and tokenisation initiatives. It would enable settlement assets in
central bank money and commercial bank money and tokenised financial assets to be grouped
together in the same register, underpinned by strong European governance, possibly shared
between the public and private sectors, as is currently the case for the T2S system, for example.
In this way, DLT technology and tokenisation can act as catalysts in a major transformation to a
unified platform for tokenised assets that would mitigate the risks of fragmentation that could arise
from multiple market DLTs.
A European Unified Ledger could therefore be a strategic lever for strengthening the integration
of European financial markets and helping to consolidate Europe's financial sovereignty. It could
be developed alongside existing infrastructures, while being connected to them, with market
needs ultimately determining their respective importance.
II. Ensuring a successful operational transition to tomorrow's post-trading
environment
As we move into a new phase in the modernisation of our market infrastructures, regardless of
the landscape that emerges, it is also essential to ensure a successful transition to the post-
trading environment of tomorrow. This transition must be based not only on technological
innovation, but also on enhanced cooperation between market participants and public authorities.
In my view, the success of this modernisation will depend on our ability to synchronise our efforts
and establish clear, shared priorities.
A. Consolidating experiments and strengthening cooperation between market participants
To ensure a smooth transition to the post-trading world of tomorrow, it is crucial to consolidate
the experiments currently underway and to maintain cooperation. This starts with a shared vision
- particularly at French financial sector level - of the future of market infrastructures. The work of
the financial sector infrastructure group (GIP - Groupe des Infrastructures de Place) under the
aegis of the Banque de France can play a key role in this process, with a blueprint expected to
be published by the end of the year.
At European level, the framework proposed by the pilot programme can support this common
vision by enabling the use of new distributed registry technologies to be tested in regulated and
secure environments. This framework is an opportunity for market participants to start anticipating
and adapting their businesses. Nevertheless, regardless of whether we are talking about
multilateral trading facilities (MTF), securities settlement systems (SSS) or a combined solution
(Trading and settlement systems), obtaining a licence is both a medium- and a long-term
commitment. Many players seem reluctant to take this step because of the uncertainty
surrounding the future of a central bank digital currency settlement solution for tokenised assets.
This uncertainty needs to be resolved and the authorities are working together to provide a clear
perspective on what the central bank settlement solution will look like. In my view, a secure and
liquid settlement asset available on the DLT is one of the keys to the success of the pilot
programme. A CBDC-based solution would provide an important lever in supporting the transition
enabled by the pilot programme, and we have already developed our own blockchain, DL3S, for
this purpose. But trials are in progress and we shall see which solution is chosen.
This European challenge is rounded out by an international challenge. It is vital that the French
and European financial sectors are well represented in the experiments being conducted on a
global scale, such as the work being carried out by the Bank for International Settlements. I am
thinking in particular of the Agorá project, which focuses on CBDC and commercial bank money
for cross-border payments. Adequate representation of national players in these different projects
is essential for defending our interests and ensuring that the international standards developed
are in line with both our interests and our needs.
B. Setting priorities: maintaining the two-tier monetary system and modernising the market
segments that are currently least well served
[Slide 4] In this phase of the transformation, it is vital not only to cooperate but also to define clear
priorities to guide the modernisation of our market infrastructures. The most important of these
priorities is to retain the two-tier monetary system, in which central bank and commercial bank
money each play a distinct but complementary role. This model has proved its worth in ensuring
the stability and resilience of the financial system and must be preserved to help with the adoption
of technological innovations without upsetting fundamental balances.
At the same time, it would be useful to prioritise those market segments that can, in the short
term, benefit from technological progress and infrastructure modernisation. Among these, over-
the-counter (OTC) markets, such as the commercial papers market and the settlement of
investment fund units, represent immediate opportunities to enhance the efficiency and
transparency of post-trading processes. Similarly, green finance subject to strict criteria, a rapidly-
growing segment, could benefit greatly from the increased transparency that appropriate
modernisation of market infrastructures could bring, thereby facilitating the financing of projects
as part of the ecological and digital transition.
*
* *
To conclude, it seems to me that today, as in the past, a mixture of competition and cooperation
is needed if the post-trading environment is to make the expected contribution to developing
Europe's financial firepower.
Important strategic and operational matters can be included within the scope of this cooperation.
I have touched upon some of these and, as you will have understood, the Banque de France is
ready to play its part in this cooperation and is always ready to listen to the views of Paris financial
centre participants.
EUROCLEAR CONFERENCE
INNOVATING TO SERVE THE CAPITAL MARKETS
UNION
OPENING ADDRESS
What will tomorrow's post-trading industry look
like and what forms of cooperation will it
deploy?
DENIS BEAU
FIRST DEPUTY GOVERNOR
3 OCTOBER 2024
PUBLIC
A strategic vision to meet CMU challenges
In the short term: expand the Eurosystem's service offering for settling tokenised
assets in central bank currency
CoBM
CREDIT INSTITUTIONS
Securities
RETAIL PAYMENTS WHOLESALE PAYMENTS ORGANISED MARKETS TOKENISATION
PAYMENT PAYMENT SYSTEMS
PAYMENT SECURITIES
MTF
SCHEME
Tokenised
European
National Stable
securities
e.g. CB coins
e.g. CORE(FR) e.g. EURO1
CCP
MARKETS
CoBM
e.g.
Tokenised
European deposits
Ethereum
OTC
e.g. RT1, STEP2-T
CSD
CoBM
CoBM
CeBM
CoBM
FX
CeBM
CENTRAL LIQUIDITY MANAGEMENT (CLM)
CLS
SETTLEMENT SOLUTIONS FOR
Banking
RTGS T2S TIPS
Correspondent
TOKENISED ASSETS
CBDC
A strategic vision to meet CMU challenges
In the long term: create a Unified European Ledger
ORGANIZED MARKETS
RETAIL PAYMENTS WHOLESALE Securities
PAYMENT
PAYMENTS
PAYMENT SYSTEMS
SECURITIES
SCHEMES
Stable
National European
Tokenised
coins
securities
e.g. CORE(FR)
e.g. EURO1 CCP
MARKETS
Tokenised
European
e.g.
deposits
OTC
e.g. RT1
CSD Ethereum
CREDIT
?
INSTITUTIONS
Tokenised
Stable
CBDC
deposits
coins
UNIFIED
CeBM CoBM
EUROPEAN

Single register
LEDGER
 Two-tier monetary
Securi
system
ties
CENTRAL LIQUIDITY MANAGEMENT (CLM)
 Multi-currency

Multi-asset
TIPS
T2 RTGS T2S CBDC  Access expanded
(FPS)
beyond TARGET
participants
Ensuring a successful operational transition to tomorrow's post-trading environment
Setting priorities
€
Two-tier
monetary system
CeBM-CoBM
Transparency of
settlement of
Green
investment fund
Finance subject
units
to strict criteria
Analyses to be
pursued
OTC Eligibility of
Commercial tokenised
Paper securities as
collateral