European Central Bank To Implement A Cross-Currency Settlement Service On The TIPS
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The European Central Bank recently started implementing a cross-currency settlement service on the Eurosystem’s Target Instant Payment Settlement (TIPS) service.
Connecting Cross-Currency Settlement Service To Tips
According to reports, the service will allow any payment originating in one Tips currency to be settled in another Tips currency, and in central bank money. The first currencies to be supported will include the Swedish kronor, the Danish krone, as well as the EU’s euro.
European financial institutions have been working on improving cross-currency payments in the Tips system ever since 2020. The most active players over the last four years were Danmarks Nationalbank and Riksbank.
Riksbank’s Governor, Erik Thedeen, commented on the matter by saying that it is very positive that the development has come far enough for the functional infrastructure for cross-currency payments to emerge. He added that the decision supports the global goals of the G20, which include making international payments faster, cheaper, and safer.
However, he also added that, with the new infrastructure in place, it will be up to the market to create the services that would satisfy the emerging demand of the general public.
The Big Goal Is To Connect The Fast Payment Systems
The push to make cross-currency payments simpler, faster, safer, and cheaper is only a part of the big picture, however. That being the larger ambition to connect domestic real-time networks of all EU nations and have them cross their respective borders, to create one massive EU banking system.
This Tuesday, October 22, the Eurosystem announced that it intends to commence exploratory work on integrating Tips with Project Nexus. This is an initiative led by the Bank for International Settlements (BIS) which was designed to provide a centralized single connection to instant payment networks globally. The system would rely on ISO 20022 message specifications, combined with a suite of purpose-built APIs.
The initiative came after a successful proof-of-concept between Eurosystem, Singapore, and Malaysia in 2022. Ever since, the BIS in Singapore has worked with the central banks and IPS operators in several nations, including Singapore, Malaysia, Indonesia, Thailand, and the Philippines.
The goal was to evaluate the model and move to a live implementation of Nexus. However, as part of exploratory work involving the linking of the Target Instant Payment Settlement with other fast payment systems, the Eurosystem has decided to join the project as well, according to BIS.
