DLT and tokenisation: Shaping Europe's financial future

Distributed Ledger Technology (DLT) has the potential to have profound implications for the financial system.

The Central Bank of Ireland (CBI) is issuing this Discussion Paper (DP) to stimulate informed dialogue on the future role of DLT and tokenisation applications within the Irish and European financial services ecosystem.

The CBI aims to engage stakeholders, including market participants, technologists, academics, innovators, investors, consumers, peers, and policymakers, to examine the implications of DLT for financial market functioning.

The paper seeks to inform the CBI's view on how the technology's potential benefits can be realised and its risks managed.

Given the borderless nature of DLT, the CBI is closely engaged with the European Central Bank (ECB), European Commission (EC), European Supervisory Authorities (ESAs), IOSCO, and the Bank for International Settlements (BIS) to ensure a coordinated approach to innovation and stability.

Distributed Ledger Technology (DLT) establishes a shared 'source of truth' via a common ledger, replacing disparate systems with a synchronised digital record.

Tokenisation involves issuing or representing assets as digital tokens, either 'digitally native' or 'non-native' forms of existing assets.

DLT systems are diverse, categorised as public or private, and permissioned or permissionless, influencing their operational dynamics.

These technologies offer potential benefits like increased efficiency, support for financial innovation, enhanced transparency, and greater integration in European capital markets, fundamentally transforming financial infrastructure through a collectively operated shared ledger.