The European Central Bank (ECB) has noted the Central Bank of Iceland 's (Seðlabanki Íslands) interest regarding potential participation in T2 and TIPS. If Iceland were to join T2 and TIPS, it would enable market participants in the country to settle transactions using central bank money in both EUR and ISK.

The ECB, representing the Eurosystem, has stated that it is prepared to support this initiative and collaborate with Seðlabanki Íslands as the feasibility study progresses. The initial focus of the assessment will be on TIPS, with T2 to be considered afterward. These services, part of the Eurosystem's TARGET Services, are aimed at supporting a secure, resilient, and efficient European payment system.

Overview of the T2 and TIPS systems According to the ECB, T2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. Central banks and commercial banks can submit payment orders in euro to T2, where they are processed and settled in central bank money, (money held in an account with a central bank). T2 settles payments related to the Eurosystem’s monetary policy operations, as well as bank-to-bank and commercial transactions.

Every five days, T2 processes a value close to the entire euro area GDP, which makes it one of the largest payment systems in the world. More than 1,000 banks use T2 to initiate transactions in EUR, either on their own behalf or on behalf of their customers. Taking into account branches and subsidiaries, more than 43,000 banks worldwide and all their customers can be reached via T2.

The same source explains that the TARGET Instant Payment Settlement (TIPS) is a market infrastructure service launched by the Eurosystem in November 2018. It enables payment service providers to offer fund transfers to their customers in real time and around the clock, every day of the year. Thanks to TIPS, individuals and firms can transfer money between each other within seconds, irrespective of the opening hours of their local bank.

Source: Link .