ECB’s Blockchain Push: Money and Assets Could Change Hands at the Same Time
The European Central Bank is evaluating three ways to use central bank money in blockchain-based markets that could enable financial assets and payments to change hands simultaneously.
European Central Bank (ECB) Executive Board member Isabel Schnabel presented the new framework at the Bank of England’s Future of Money conference in London. According to comments reported by The Block, the aim is to bring central bank money together with tokenized securities, bank deposits, and stablecoins on the same or interconnected infrastructure.
A key benefit of this approach is that the transfer of an asset and the corresponding payment can take place together. Schnabel said tokenization could make financial transactions programmable and enable assets and money to interact directly.
How will central bank money enter the system?
Under the first model being considered by the ECB, central bank reserves would be issued directly on a programmable platform. This would make central bank money part of the new infrastructure.
The second model preserves the existing payment infrastructure. The system, in which large-value payments are settled individually and in real time, would be connected to platforms using distributed ledger technology (DLT) through a linking layer. This option would not require reserves to be tokenized.
Under the third model, private payment tokens backed entirely by reserves held at the central bank would be issued. Rather than being direct liabilities of the central bank, these tokens would represent private claims backed by reserves.
Commercial banks would remain part of the system
The framework aims to preserve today’s two-tier monetary system. While central bank money would continue to play a fundamental role in the final settlement of transactions, commercial banks would continue to provide money and financial services to their customers.
This means the transition to blockchain-based infrastructure would not be built around eliminating banks. Deposits, securities, and stablecoins could be transacted alongside central bank money.
Faster payments and more efficient use of collateral
Financial institutions’ expectations point in the same direction. In a Lloyds survey of senior decision-makers at major financial institutions in the UK, 71 percent of respondents said they believe tokenization will reshape financial services.
Sixty percent of respondents cited faster payments and transaction settlement as the biggest potential benefit, while 41 percent pointed to collateral and liquidity management. These expectations focus not merely on converting assets into digital tokens, but on using money and collateral more efficiently.
While the ECB’s Pontes project is advancing work on using central bank money in DLT-based transactions, Appia is examining the infrastructure on which tokenized markets could be built. Appia is considering a single shared ledger, interconnected networks, and multiple shared ledgers.