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Financial Markets & Investor Protection

Luxembourg banks join forces to test the ECB’s digital euro for financial markets

Published on 26 May 2025

As the European Central Bank (ECB) continues exploring how to future-proof Europe’s financial infrastructure, Luxembourg has emerged as a key contributor to one of the most ambitious initiatives in the sector: the pilot project for a wholesale central bank digital currency (CBDC). The goal? To explore how distributed ledger technology (DLT) could revolutionise the way large financial transactions are settled across Europe. Coordinated by the Eurosystem—which includes the ECB and euro area national central banks—the 2024 pilot tested how wholesale CBDC could support faster, safer, and more efficient settlement of securities and payments on DLT platforms. Several Luxembourg-based financial institutions took part in this high-impact initiative, with active support from the Banque centrale du Luxembourg (BCL) and the ABBL, who helped shape the national contribution to this European experiment.

Summary

    A digital future for interbank settlement

    Wholesale CBDC refers to a form of digital euro reserved for financial institutions—primarily used to settle high-value transactions securely in central bank money. While TARGET Services have supported digital settlement for decades, the rise of blockchain-based platforms prompted a need to test whether existing systems can effectively connect with new DLT infrastructures.

    In 2024, the ECB launched two waves of large-scale experiments involving 64 participants from central banks, market operators, and banks. Over 200 transactions were processed, amounting to a total value of €1.59 billion. These included use cases such as bond issuance, delivery-versus-payment (DvP), and cross-currency payment-versus-payment (PvP) settlements.

    Luxembourg-based players at the forefront

    uxembourg’s financial ecosystem was strongly represented in this initiative, with three standout contributions:

    • Clearstream, the international central securities depository headquartered in Luxembourg, provided its D7 digital post-trade platform. Using a private blockchain, Clearstream conducted multiple test cases of DvP operations.

      “It was a resounding success,” said Thilo Derenbach, Director of Business Development for Digital Securities Services. “It showed how blockchain can increase speed, reduce costs, and improve operational efficiency.”

    • Spuerkeess, Luxembourg’s state-owned bank, participated in a test involving the European Investment Bank (EIB) and UK-based NatWest. The goal was to ensure atomic settlement: guaranteeing that securities and payments change hands simultaneously on-chain, reducing counterparty risk.

      “This ensures automatic reconciliation and full security of the transaction,” explained Christophe Medinger, Deputy Head of the Digitalisation Unit at Spuerkeess.

    • HSBC Continental Europe, Luxembourg contributed through its HSBC Orion platform. The bank took part in a €100 million digital bond issuance by the EIB, settled in wholesale CBDC via the Banque de France’s DL3S system.

      “This demonstrated the interoperability between two DLT platforms and central bank money,” stated Emanuele Vignoli, CEO of HSBC in Luxembourg.

    Strategic coordination and lessons for tomorrow

    The Banque centrale du Luxembourg supported and coordinated all use cases involving Luxembourg-based participants. Its role was essential in aligning technical execution with broader Eurosystem objectives—namely, maintaining the euro’s stability and ensuring it remains a trusted anchor in digital financial markets.

    Nicolas Weber, Executive Board Member of the BCL, summarised the motivation:

    “There was no efficient and stable euro cash solution available for DLT platforms. Many market players turned to central banks for a compatible settlement system.”

    Looking ahead, all participating institutions share the view that wholesale CBDC could become a permanent reality well before a retail digital euro reaches consumers. The benefits—from faster cross-border settlement to improved risk mitigation—make a strong case for this transition.

    The ABBL, having actively contributed to promoting and facilitating Luxembourg’s involvement in this pan-European effort, will continue to support members as the financial system evolves towards a digital future.