Earlier this month, Pontes went live, enabling transactions in Europe’s emerging digital capital markets to be settled in central bank money for the first time.
The Eurosystem service bridges platforms that use distributed ledger technology (DLT) to trade digital securities and TARGET Services, the existing infrastructure used to settle euro payments in central bank money. In simple terms, it lets the securities side of a digital transaction take place on DLT infrastructure while the corresponding payment settles through the central banking system.
Four market infrastructures are participating in the initial launch: Luxembourg-based Clearstream and Frankfurt-based SWIAT and Cashlink, alongside Vilnius-based Axiology.
I spoke with Martynas Pilkis, Business Development Officer at Axiology, while visiting Vilnius, to learn more.
Axiology is building digital infrastructure for European capital markets, enabling companies and governments to issue, trade, and settle digital securities such as bonds.
Its platform brings together services including securities issuance, trading, custody, and settlement in one regulated environment, aiming to make it easier and cheaper for issuers to raise capital and for investors to access investment opportunities across Europe.
While the retail digital euro is being developed as a new form of central bank money for everyday payments, Pontes addresses a different part of that picture: how central bank money can support settlement in digital capital markets.
TARGET Services is the Eurosystem’s infrastructure for settling payments in central bank money — euros held at central banks rather than money issued by commercial banks or private assets such as stablecoins. In the context of Pontes, it provides the cash side of a tokenised securities transaction, while DLT operators such as Axiology handle the securities side.
Why "the cash leg" matters
“We are not dealing with cryptocurrency. We are dealing with financial instruments. But when you trade financial instruments on DLT-native infrastructure, you also need a settlement asset.” Axiology already supports settlement in euro-denominated stablecoins, allowing transactions to settle on the same day or atomically, depending on customer needs.
With Pontes now live, customers have another option: settling the cash leg in central bank money.
Pilkis previously spent two years working with the Committee on Payments and Market Infrastructures in Basel on the G20 cross-border payments programme, including work examining stablecoins. He argues that while stablecoins offer benefits, their limitations matter most for high-value transactions.
“Stablecoins, for high-value payments, are not that good because you still have certain credit and liquidity risks.”
Even supposedly secure stablecoins have experienced fluctuations.
“If your stablecoin can trade for 87 cents per dollar, that's not very good for serious payments. That's why access to central bank money is very important.”
There is also an incentive for the Eurosystem to ensure central bank money remains relevant as new forms of financial infrastructure develop.
Today, DLT market infrastructures such as Axiology remain relatively small compared with incumbents. But Pilkis argues that this could change quickly if tokenised capital markets reach an inflection point.
“What happens if central bank money is left behind and doesn't give access to these new infrastructures? We will make do without central bank money, and maybe we will reduce its usage overall.”
That, he argues, could introduce additional credit and liquidity risk into securities settlement.
“This is not something that the ECB would like to see. That's why they are also prioritising this.”
Three years of infrastructure development
DLT allows transactions and ownership records to be maintained on shared digital infrastructure. Axiology operates a regulated DLT Trading and Settlement System under the EU DLT Pilot Regime, enabling digital securities to be issued, traded, and settled through the same infrastructure.
While Axiology also holds a pan-European MiFID brokerage licence, Pilkis says its DLT Trading and Settlement System designation is far more unusual.
“There are only four DLT Trading and Settlement Systems in Europe,” he explained.
Obtaining that status involved scrutiny beyond Lithuania's national regulator. “It's not only the national regulator vetting you, but also the European Securities and Markets Authority, and the European Central Bank for your settlement mechanism — how settlement finality is reached on your trading platform.
“These things have been carefully reviewed, and it's not easy to jump onto that train.”
The Eurosystem began its exploratory work on DLT-based wholesale settlement in 2024, followed by the formal Pontes project and the development of its initial launch model. Axiology's involvement stretches back to that earlier experimentation.
According to Pilkis, the company has been working with the Bundesbank since close to its inception and participated in testing of the Bundesbank's trigger solution in spring 2024.
“We had early traction and showed that our platform is capable of handling these transactions and being interconnected with the TARGET system.”
Pilkis believes smaller technology companies also offer something important to regulators and institutions: speed.
“They really want to have us. They admire our speed because we have an agile technical team which can deliver fast. We are fast with our clients. I think for any startup, that's a good sign to have.”
What Pontes changes in practice
According to Pilkis, TARGET is the core Eurosystem infrastructure moving central bank money.
“What we do is stand in the middle between the asset leg and the cash leg, and on behalf of our participants, we instruct the cash leg.”
Axiology is testing the connection across the digital securities lifecycle, including primary issuance, secondary-market transactions, redemptions, and coupon or interest payments.
The choice of settlement asset can therefore match the needs of a transaction, whether that means the speed and programmability of a stablecoin or central bank money through Pontes. This means financial institutions no longer have to choose between using new DLT infrastructure and settling in central bank money.
What will move onto the new infrastructure? Pilkis expects fixed income to be one of the first areas where the infrastructure gains traction.
“In Germany, we're seeing state-led initiatives, particularly from KfW, so I'm sure we'll see issuances there.”
He also points to France, where there is interest in moving part of the Negotiable European Commercial Paper market onto DLT infrastructure.
Elsewhere, Axiology is working with banks on how they could move assets between entities within the same banking group using Pontes for settlement.
The company is also in discussions with European treasuries about sovereign issuance.
“Most treasuries are really interested in how we can make sovereign issuances on new rails, accessing new types of investors and saving money because the new system can be more cost-efficient.”
However, he expects adoption to be uneven.
“This will not be fast. As always when you're moving with the public sector, it really takes time.
I have this feeling that bigger countries, especially France and Germany, are prioritising these projects. Others are a little bit in wait-and-see mode.”
Can digital infrastructure help fix Europe's fragmented capital markets?
For Axiology, the opportunity extends beyond changing the technology used to settle securities. Pilkis argues that one of the longstanding problems with European capital markets is that infrastructure remains fragmented along national lines.
“One of the major problems with Europe's existing financial market infrastructure is that it remains highly divided along jurisdictional borders. That's one of the big hurdles to achieving a genuine Capital Markets Union.”
Axiology, by contrast, has been designed as a pan-European platform.
“With a new breed of companies like Axiology, we're pan-European from day one.”
Pilkis believes more open and cost-efficient digital markets could also make capital markets accessible to smaller issuers.
“Today, if you're issuing a fixed-income instrument in Europe and you're not issuing roughly €100 million, obtaining ratings and accessing the broader market can be difficult.
With open digital capital markets, we can bring smaller issuances into the market more efficiently and create more opportunities for investors.”
What needs to happen next?
Pontes solves one piece of the infrastructure question. The next challenge is ensuring Europe doesn't build a collection of disconnected digital markets around it. For Axiology itself, Pilkis says the immediate priority is growing its network.
“At the moment, our network is focused on brokerages and crowdfunding platforms. With Pontes, it's the right time to grow the commercial-banking side.”
Axiology already has commercial banking partners in the Baltics, but wants to bring more banks from across the EU onto its infrastructure.
“Pontes is a great help with that.”
Further ahead, Pilkis sees programmability as one of the more transformative possibilities created by tokenised capital markets.
“Today, your commercial bank can programme certain things on your behalf — for example, an automatic monthly utility payment. But in a tokenised future and digital capital markets, we want stakeholders themselves to be able to build programmable functionality. That could enable entirely new business models.”
For Pilkis, that's ultimately where the technology's potential becomes most interesting. “If we see that emerge five or ten years from now, I'll be very happy.”
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