But despite the uncertainties surrounding DLT’s potential, we want to be prepared for a scenario where market players adopt DLT for wholesale payments and securities settlement. We must ensure that, in such a scenario, central bank money would still retain its role as the settlement asset for wholesale transactions. If, for example, market players start to use DLT for securities settlement but face difficulties using TARGET Services[10], they may turn to alternatives like commercial bank money or stablecoins. This would entail a number of risks, such as central bank money having a reduced role in settlement processes, as well as trading and liquidity becoming fragmented. The result would be payments and securities settlement becoming less safe and less efficient, which would undermine financial stability. The use of stablecoins would magnify these risks. As we have seen in recent months, stablecoins are prone to runs. In other words, they are stable in name only. And allowing them to be fully backed with central bank money would effectively outsource the provision of central bank money to private entities, endangering monetary sovereignty. [11] A shift away from central bank settlement systems would also imply that authorities would lose direct access to settlement data. This could slow the speed of intervention in the event of settlement bottlenecks and impair the analysis of financial stability. The Eurosystem is therefore exploring ways in which market participants who adopt DLT could interact with the TARGET Services to settle the euro cash leg of their transactions in central bank money.

But regardless of the technology used by market participants for their wholesale payments and securities transactions, our goal will always be the same: ensuring that central bank money remains the anchor of stability of the monetary system. 1. Distributed ledger technology (DLT) refers to a family of technologies aiming to solve the problem of reaching a consensus between participating entities, which is required for validating data and updating the distributed ledger, without relying on central coordination. 2. Central bank reserves are liabilities of the central bank owned by commercial banks. They are the most liquid and risk-free asset available in the financial system. 3. The TARGET Services offered by the ECB and the national central banks include TARGET2 for wholesale payments, TARGET2-Securities (T2S) for securities settlement, and TARGET Instant Payment Settlement (TIPS) for instant payments. 4. Panetta, F. (2021), “Central bank digital currencies: a monetary anchor for digital innovation”, speech at the Elcano Royal Institute, Madrid, 5 November. 5. Principle 9 of the Principles for financial market infrastructures, issued by the Committee on Payments and Market Infrastructures and the Technical Committee of the International Organization of Securities Commissions states that “a financial market infrastructure should conduct its money settlements in central bank money, where practical and available”. 6. Post-trade services are the activities (clearing, settlement, custody, asset servicing and reporting) that take place once a trade has been realised, in order to transfer the ownership of the security from the buyer to the seller against the corresponding payment. 7.