European Central Bank points out XRP Ledger as important facilitator in next gen financing tool

The European Central Bank (ECB) has identified XRP Ledger as the underlying blockchain network for the Axiology distributed ledger technology (DLT) system. Crypto analyst Diep Sahn first noticed this in the ECB Eurosystem report on using emerging technologies for settlements.

One of the projects that participated in the Eurosystem experiment was Axiology, a DLT securities trading and settlement infrastructure. The startup, founded by a former board member of the Bank of Lithuania, Marius Jurgilas, operates under the EU DLT Pilot regime.

According to the report, 60 stakeholders and four central banks participated in the exploratory work across two phases. Through experiments and trials, these projects tested out 48 use cases in eleven categories, ranging from issuance and settlement of bonds to margin calls.

Axiology participated in the experiment under Category 1, focusing on the institutional issuance of debt securities and the lifecycle management of such securities, from the issuance to coupon payments to redemption.

Axiology leveraging XRP Ledger technology for permissioned DLT

The report included a comprehensive explanation of Axiology capabilities and its use cases in the experiment, which shows that the platform was built using the open-source code of  XRP Ledger. However, it was designed to be private and permissioned, allowing it to be independent while leveraging XRPL.

The report said:

“While Axiology benefits from XRP Ledger technology, it operates as an independent system, designed to streamline trading, settlement, and custody of tokenized assets, such as financial securities, with enhanced security and efficiency.”

As a private and permissioned network, Axiology reportedly combines trading, accounting, and settlement functions into one infrastructure. This enables instant Delivery Versus Payment (DVP) settlement capabilities.

However, it also operates with more compliance standards and risk management frameworks than public blockchains. For instance, it has to Know Your Customer (KYC) procedures, such as verifying investors’ identities and allowing freezing of wallets while its on-chain capabilities are limited to reduce the risks associated with smart contracts.

The report also comprehensively explained how Axiology functions in the lifecycle management of a bond, with the platform handling issuance, coupon payments, and redemption upon maturity.

Interestingly, XRP Payment plays a crucial role in the processes, with the ECB noting that the wallets involved in transactions use XRP Payment to move funds. However, most of the processes rely on instructions contained in metadata that ensure seamless transactions without the inefficiency of the traditional bond market.

Meanwhile, the experiments focused mostly on whether Axiology infrastructure and solutions can be interoperable with Central Bank Money (CeBM) and external settlement platforms. This is essential to identifying how the platform will function in real-world use cases.

XRP holders are bullish on the token after the ECB report

Many in the XRP community have pointed to the ECB report as a positive sign for the XRP Ledger. Diep Sanh said that this is evidence that XRP is powering the future of finance.

Others also shared optimism, noting that while Axiology only uses XRPL technology, it is a vote of confidence for the network and shows its capacity for institutional and permissioned use. XRPL has already planned new features to improve its capacity for enterprise-grade products.

However, the positive sentiments in the community have not been enough to lift its price this year. XRP remains down 5.79% year-to-date and has lost 6.49% of its value in the last 30 days, continuing an underperforming year like other major cap altcoins.

Still, most XRP investors are holding in profit, with 65.1% of XRP circulating currently held at a profit, according to Santiment data. This puts it among the top three for percentage of circulating supply in profit, behind Bitcoin and Ethereum.

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