Schnabel Says Central Bank Money Must Move On-Chain
The ECB is framing tokenized central-bank money as essential infrastructure for settlement, liquidity and monetary control.
European Central Bank Executive Board member Isabel Schnabel has moved the debate over tokenized finance beyond experiments at the edge of the banking system. Her message at Jackson Hole was that central banks themselves need to operate on distributed ledgers if public money is to remain the final settlement asset in a market increasingly built on programmable rails.
“To reap the full benefits, central banks need to go on-chain too,” Schnabel said. In practical terms, that means bringing central-bank money into tokenized environments and modernizing the tools used to implement monetary policy. The proposal is not for the ECB to endorse every blockchain or private token. It is an argument that tokenized securities markets need a settlement asset carrying a direct public-sector claim, just as conventional wholesale markets ultimately settle in central-bank reserves.
Schnabel distinguished three broad models. The most ambitious would tokenize reserves directly, allowing eligible institutions to settle assets and cash atomically on a ledger while preserving a claim on the central bank. A second approach would bridge a distributed ledger to reserves held in existing payment systems. That is easier to deploy but can weaken atomic settlement because the asset and cash legs remain in different technical environments. A third would use private intermediaries that hold omnibus central-bank accounts and issue their own settlement tokens, introducing a private-law claim and another layer of counterparty risk.
The choice is not merely architectural. If wholesale tokenized markets settle mainly in private stablecoins or commercial-bank liabilities, liquidity could fragment across issuers and platforms. In stress, holders may rush to convert those private claims into central-bank money. A native public settlement asset could reduce that conversion risk and preserve the “singleness” of the currency—the principle that one euro should trade at par with every other euro regardless of its form.
Schnabel also linked on-chain infrastructure to crisis management. Programmable central-bank money could automate collateral rules, apply differentiated interest rates and deliver liquidity within the same environment where tokenized assets trade. That could shorten the operational chain between a policy decision and the institutions that need funding. It could also make intraday liquidity more precise, although automation would have to be governed carefully to avoid amplifying mistakes or procyclical behavior.
The ECB is already pursuing two related projects. Pontes is intended to connect distributed-ledger platforms with the Eurosystem's existing TARGET services, creating a bridge for settlement in central-bank money. Appia is the longer-term effort, examining a more integrated European architecture, including technical standards, legal foundations and potential interoperability among ledgers. Schnabel left open whether Europe should converge on a single ledger or link several compatible systems.
That flexibility is important because the market is not yet standardized. Banks, central securities depositories and fintech firms are testing different networks, privacy models and governance arrangements. A single public ledger could concentrate liquidity and simplify standards, but it could also create a large operational dependency. Multiple interoperable ledgers could support competition, though interoperability is difficult to make legally and technically final.
The speech does not amount to a decision to issue tokenized reserves, and it does not set a commercial launch date. Eligibility, privacy, cyber resilience, collateral policy and the legal status of ledger records remain unresolved. The ECB must also ensure that any new rail does not split liquidity from the very TARGET infrastructure it is meant to modernize.
Why it matters
For banks and tokenization platforms, the ECB is signaling that settlement design will be a core policy question, not an afterthought. Projects that can connect to central-bank money and satisfy public standards for finality, identity and resilience are likely to have an advantage over closed systems that rely on opaque private claims.
For issuers of tokenized bonds, funds and deposits, native central-bank settlement could reduce counterparty exposure and free collateral trapped by asynchronous processes. For the ECB, it is about retaining monetary control as financial assets migrate to programmable networks. The direction is now clearer: Europe does not intend to leave the settlement layer of tokenized markets entirely to private stablecoins. The difficult work is turning that principle into infrastructure that is interoperable, legally final and robust enough for systemically important activity.