A New Blueprint for Securities Settlement in Europe
The European Commission has unveiled a transformative initiative to modernize the clearing and settlement of tokenized securities. The plan seeks to dismantle the long-standing dominance of centralized depositories, paving the way for a more resilient, collaborative, and distributed financial infrastructure.
Two-Pronged Approach for Systemic Resilience
The proposed framework introduces two strategic pathways. The first envisions a settlement mechanism jointly operated by multiple banks, eliminating a single controlling entity. The second splits traditional CSD functions—assigning verification and record-keeping to separate institutions—while settlement occurs via existing CSDs or DLT-based platforms.
- Enhances interbank clearing collaboration
- Leverages DLT for greater transaction transparency
- Reduces systemic risk by eliminating single points of failure
While Germany, Luxembourg, and Italy have launched national experiments, the bank-driven distributed model stands out as a pioneering direction, potentially forming the backbone of Europe’s next-generation financial ecosystem.