European Central Bank calls for DLT post-trade compatibility

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Issued by the Advisory Group on Market Infrastructures for Securities and Collateral at the end of last week, the report examines the possible impact of technology on various services that relate to the settlement process for securities. It further discusses implications in the areas of collateral management, asset maintenance and data reporting.

Perhaps most notably, the ECB, repeating the feelings expressed earlier by the Bank of England, suggested that in a future market where distributed ledgers work alongside legacy software, both systems will need to be able to communicate as needed.

That preference for interoperability was demonstrated in April, when the Bank of England showed that although it would not yet use the technology as the basis for its next Real-Time Gross Settlement (RTGS) system, it nevertheless plans to make it compatible for future developments.

In addition to interpreting the interaction, the ECB report says that if more intellectual contracts are used - self-executing code snippets associated with conditions on the blockchain, financial data standards, such as ISO 20022, may need to be adjusted to take into account their specific functions.

The study, in particular, appeared in connection with the joint issue of the ECB and the Bank of Japan earlier last month, when the two central banks announced that they (at least for now) would switch to use the technology for some of their manufacturing services.