ECB Weighs Three Ways to Bring Central Bank Money Onto Blockchain

European Central Bank Executive Board member Isabel Schnabel presented three possible routes for moving central bank money onto distributed ledger technology. She spoke on Thursday at the Bank of England’s Future of Money conference in London. In the first, the ECB would issue reserves directly on a programmable platform.

In the second, today’s real time gross settlement system stays as it is, with an interoperability layer linking it to DLT platforms by hash, so reserves themselves are not tokenized. In the third, reserves held at the central bank are tokenized, and fully backed settlement tokens are issued as private claims rather than direct central bank liabilities.

Two-Tier Monetary System Stays in Place

Schnabel said any onchain setup would keep the current two-tier structure. Central bank money would anchor settlement, while commercial banks keep serving customers. It would sit beside tokenized securities, deposits and stablecoins. She added that tokenization can make transactions programmable and atomic, so an asset and its payment move together.

Pontes and Appia: ECB’s DLT Projects

The ECB launched Pontes last month to provide tokenized central bank money for DLT based transactions. Appia is studying market designs, including a unified ledger, interconnected networks and multiple shared ledgers.

UK Banks Expect Tokenization to Reshape Finance

A Lloyds survey found 71% of senior decision-makers at large UK financial institutions expect tokenization to reshape the sector. Faster payments and settlement were the top benefit at 60%, followed by collateral and liquidity management at 41%.