First European Supranational Issues DLT Bond on Pontes

The European Stability Mechanism (ESM), the Deutsche Bundesbank, and Clearstream are participating in the first digital bond issuance by a European supranational issuer to be settled through the Pontes platform. Pontes is the Eurosystem platform for settling wholesale financial transactions using distributed ledger technology (DLT) directly in central bank money. The transaction marks the transition of Europe’s wholesale digital financial infrastructure from pilot projects to live deployment.

The transaction involves a first-time digital ESM benchmark bond of €1 billion. The Bundesbank supports the issuance as the issuing and paying agent and has been onboarded to Pontes as a market participant. Clearstream acts as the Pontes Market DLT Operator. It creates and manages the bond in digital form on the Clearstream Digital Infrastructure and enables delivery-versus-payment (DvP) settlement of the bond on its D7 DLT tokenised securities platform with the cash leg settled via Pontes’ directly in TARGET (T2), the Eurosystem’s existing market infrastructure for high-value payments in central bank money.

DZ BANK and Société Générale act as advisory banks.

Connecting digital and traditional infrastructures

The issuance combines digital technology with the existing legal framework, infrastructure, and operating standards of European capital markets. Clearstream’s hybrid model allows the bond to move from the D7 DLT environment to the traditional market infrastructure. There, it can be settled via the Eurosystem´s existing TARGET2-Securities (T2S) service.

The benchmark bond is expected to be listed on the Luxembourg Stock Exchange (LuxSE) and is expected to be eligible as collateral for monetary policy transactions in the Eurosystem Collateral Management System. It is also expected to be used as eligible collateral at Eurex Clearing and to be included in general collateral baskets at Eurex Repo. These features support secondary-market liquidity and access for a broad range of investors.

Pierre Gramegna, Managing Director of the European Stability Mechanism said:
“This benchmark bond issuance by the ESM marks an important milestone for Europe’s digital financial markets. The ESM’s mandate is to safeguard the financial stability of the euro area. The ESM supports innovation where it strengthens trust, efficiency, and resilience. Pontes embodies Europe’s capacity to develop trusted and innovative payment infrastructure, positioning Europe at the forefront of digital finance. This will strengthen the international role of the euro and deepen Europe’s capital markets.”

Joachim Nagel, President of the Deutsche Bundesbank, said:
“The ESM’s issuance of a DLT-based bond, with the corresponding cash settlement carried out via Pontes, is an important step towards integrating distributed ledger technology (DLT) into Europe’s financial market infrastructure. It demonstrates the potential of DLT to make securities issuance and settlement more efficient and will strengthen the European capital market. The Bundesbank is proud to support the ESM in its project.”

Stephanie Eckermann, Member of the Executive Board of Deutsche Börse Group and Chairwoman of Clearstream said:
“With the launch of Pontes, wholesale central bank money transactions have become an operational reality and an important part of processing securities on distributed ledgers. The Clearstream Digital Infrastructure combines digital asset capabilities with trusted international capital market infrastructure at scale.”

Source: ESM