Looking ahead, we are considering how the needs of the users of our wholesale settlement services might change and whether new technologies could make settlement in wholesale digital central bank money more efficient and secure. In particular, we are assessing the potential of DLT and the extent to which it could improve our services. Market players that are active in payments and securities settlement, such as banks and financial market infrastructures, are already experimenting with DLT. Our ongoing engagement with these stakeholders reveals that many of them expect DLT to experience a significant uptake in the financial industry. This would entail a shift from using centralised databases for transferring cash and assets to using decentralised networks instead. Proponents of DLT highlight a range of benefits, such as the possibility of settling transactions instantly, around the clock, in a wider range of assets and with a broader spectrum of participants, potentially including non-financial corporations. Users of DLT platforms could also program transactions to be settled automatically based on predefined conditions. Stakeholders expect DLT to be used prominently for securities post-trade processes, where it could help to reduce costs, processing times and the need for reconciliation. Some market players see the potential for efficiency gains by using DLT along the whole lifecycle of a security. And in the area of wholesale payments, market stakeholders see the potential for DLT to improve cross-border and cross-currency transactions, as it would overcome some of the frictions related to correspondent banking.

These efforts are necessary for market participants to remain confident that they can always settle systemically important wholesale liquidity and securities transactions with central bank money. Central bank money is the safest and most liquid settlement asset[5], so using it in this context helps to reduce risks in the financial system, thereby protecting financial stability. This, in turn, preserves the transmission of monetary policy and supports trust in the single currency. Over the past two decades, significant progress has been made in integrating and modernising wholesale payment systems. The transition from the national real-time gross settlement systems to TARGET in 1999, and then to TARGET2 in 2007, led to the first pan-European integrated market infrastructure for large-value wholesale payments. This enabled the rapid and reliable settlement of euro payments in central bank money. The subsequent launch of TARGET2-Securities harmonised post-trade services[6] for financial instruments, bringing an end to complex cross-border settlement procedures. And in 2018 we introduced TARGET Instant Payment Settlement (TIPS), which allows instant retail payments to be settled in real time between banks across the EU, around the clock on every day of the year. In recent years, we have been working on a new consolidated TARGET platform – a complex infrastructure that would offer the market enhanced and modernised services. We are also building a Eurosystem Collateral Management System to simplify processes that involve multiple jurisdictions, notably the mobilisation of cross-border collateral. And we are seeking to ensure that the TARGET Services remain resilient to cyber threats.