The European Central Bank (ECB) and the central bank of Iceland, Sedlabanki Islands, signed an agreement on Wednesday for Iceland to join the Eurosystem’s TARGET Instant Payment Settlement system.

This collaboration will facilitate the settlement of payments in Icelandic krona using central bank money beginning in 2028.

The Icelandic krona will become the fifth currency available for settling retail payments through the Eurosystem’s TARGET Services.

The euro, Swedish krona and Danish krone are currently used for settlements within the system, while the Norwegian krone is also set to join in 2028.

“We are delighted that more and more European countries, including from outside the European Union, are joining the Eurosystem’s TARGET Services,” said ECB President Christine Lagarde after signing the agreement.

“This reinforces the integration of Europe’s financial infrastructures, supports its strategic autonomy, brings economies of scale and strengthens economic relations,” added Lagarde.

“This is an important step in modernising Iceland’s payments landscape and ensuring it is fit for the future,” said Sedlabanki Islands Governor Asgeir Jonsson.

“Joining TIPS will strengthen both the security and efficiency of instant payments in Iceland,” Jonsson noted.

“It will enhance the resilience of our payment infrastructure and bring our payment processes into line with SEPA practices, while enabling Iceland to benefit from the scale and expertise of the Eurosystem’s TARGET Services,” Jonsson further explained.

Developed and operated by the Eurosystem, TARGET Services rely on central bank money to facilitate transfers between banks, businesses and individuals.

These services are designed to host transactions in currencies other than the euro.

TIPS is the retail payment settlement system that enables banks and other payment service providers to offer customers real-time fund transfers at all hours, every day of the year.