The European Stability Mechanism has issued its first digitally native benchmark bond, a €1 billion transaction based on distributed ledger technology and settled through the Eurosystem’s Pontes platform in central bank money.
The Deutsche Bundesbank acted as issuing and paying agent on the deal, while Clearstream served as Pontes Market DLT Operator. The Bundesbank has been onboarded to Pontes as a market participant.
Settlement in central bank money
The cash leg of the bond was settled via Pontes directly in TARGET, the Eurosystem’s payment system known as T2. Pontes is the Eurosystem platform built for settling wholesale financial transactions using distributed ledger technology directly in central bank money.
The bond is expected to be listed on the Luxembourg Stock Exchange and to be eligible as Eurosystem collateral.
Officials hail milestone
Joachim Nagel, President of the Deutsche Bundesbank, called the issuance an important step towards integrating distributed ledger technology into Europe’s financial market infrastructure. He said it demonstrates the potential of the technology to make securities issuance and settlement more efficient, and that the Bundesbank is proud to support the ESM in the project.
Stephanie Eckermann, Member of the Executive Board of Deutsche Börse Group and Chairwoman of Clearstream, said wholesale central bank money transactions have become an operational reality with the launch of Pontes. The ESM, created in 2012 to safeguard euro area financial stability, has a maximum lending capacity of €500 billion.
