Central Bank mulls over expanding Real-Time Gross Settlement hours operation - potential boost for distributed ledger technology payments and digital euro implementation
ECB Proposes Extending TARGET2 Operating Hours for Modernized European Payment Landscape
The European Central Bank (ECB) has launched a consultation on extending the operational hours of TARGET2 (T2), its main real-time gross settlement system. This move could significantly impact instant payments, distributed ledger technology (DLT) payments, and the digital euro.
Potential Changes from Extending T2 Operating Hours:
The ECB is considering extending T2's operating hours up to nearly 24/7, seeking public feedback through September 2025 and planning follow-up actions in 2026 [1][4]. This extension aligns with growing market demand for real-time settlement and seamless payment processing outside traditional banking hours.
Alongside T2, the ECB is allowing non-bank payment service providers (PSPs) access to T2 and its instant payment system TIPS, supporting wider participation and competition within the ecosystem [4].
Implications for Instant Payments:
Extended T2 hours would facilitate instant payment settlement across almost the entire week, supporting the increasing demand for immediate funds transfer and liquidity management in Europe’s financial markets [4]. A near 24/7 T2 would reduce dependencies on limited operating hours of traditional systems, enabling businesses and consumers to conduct payments at any time, enhancing efficiency and user convenience [4].
Implications for DLT Payments:
The ECB’s strategic approach includes integrating DLT-based solutions with traditional systems like T2 and T2S, aiming to unlock efficiencies such as real-time settlement and automation via platforms like Pontes and Appia [5]. Extended T2 hours would provide a backbone for DLT payments to settle in central bank money outside regular business hours, addressing one of the key challenges for blockchain-based financial transactions—settlement finality and timing reliability [5]. This integration would promote financial innovation while maintaining regulatory oversight and system stability.
Implications for the Digital Euro:
The extended availability of T2 would support the potential introduction and operation of the digital euro by offering reliable and continuous settlement infrastructure linked to central bank money [4]. Around-the-clock T2 operations would promote the use of the digital euro for real-time payments at any time, fostering easier adoption and supporting the digital euro’s role as a widely accepted means of payment across the Eurozone [4]. Continuous settlement infrastructure would also facilitate interoperability between the digital euro and other payment solutions, including instant payments and innovative DLT-based tokens.
In summary, extending T2’s operating hours aims to modernize Europe’s payment landscape by enabling nearly continuous settlement. This would boost the euro’s international role and market infrastructure resilience while supporting innovation, competition, and user convenience [1][4][5].
The final decisions will depend on the outcomes of the ongoing public consultation and further analysis by the ECB’s Governing Council in 2026 [1]. The €100,000 limit for instant payments will be removed, and while DLT payments and the digital euro are being considered in the plans, they are not the primary drivers of the proposals. Overseas firms already access the system in the middle of the night, with non-Euro area countries making up the majority of payments between 3am and 5am. Promoting the international usage of the digital euro is one of the motivations for extending T2's hours. Given that DLT systems are expected to operate 24/7, longer central bank money settlement times are desirable to enable Trigger payments at all hours and avoid the need for extra buffers in the case of CBDC. The ECB is seeking feedback on whether modest extensions or full 24/7 operations would best serve Europe’s evolving payment landscape, given the trends in conventional and emerging payment technologies.
[1] European Central Bank (2023). Consultation on extending the operational hours of TARGET2. [Online] Available at: https://www.ecb.europa.eu/paym/tgts/html/index.en.html [4] European Central Bank (2023). TARGET2: A real-time gross settlement system for the Eurosystem. [Online] Available at: https://www.ecb.europa.eu/paym/tgts/html/index.en.html [5] European Central Bank (2023). TARGET Services: Innovation and integration. [Online] Available at: https://www.ecb.europa.eu/paym/tgts/html/index.en.html
- The ECB's proposal to extend TARGET2 operating hours may lead to a review of retail regulation within the European payment industry, as more efficient settlement processes could have implications for consumer protection and fraud prevention measures.
- The news of extended T2 hours has sparked insights about the potential impacts on cross-border financial transactions, as CDBC initiatives and technology advancements could allow for 24/7 operations for non-bank payment service providers, reducing reliance on traditional banking hours.
- A shift towards near 24/7 T2 operations may bring new challenges for the finance sector, as it could lead to an increase in the need for regulatory guidance on issues such as risk management, liquidity, and AML/CTF compliance in the retail, institutional, and DLT payment segments.
- The integration of DLT-based solutions and the digital euro within the extended T2 infrastructure may have far-reaching implications for global retail and digital finance news, as it could establish Europe as a leader in innovative, accessible, and sustainable payment services across continents.
