- ECB outlined three models for bringing central bank money onto DLT rails.
- Pontes already links tokenized transactions with Eurosystem settlement infrastructure.
- Appia studies unified and interconnected models for future tokenized markets.
The European Central Bank is examining three ways to bring central bank money onchain as tokenized finance expands. Executive Board member Isabel Schnabel outlined the options Thursday at the Bank of England.
She said future settlement systems should preserve central bank money as the monetary anchor. The ECB also wants commercial banks to retain their existing role with customers.
Central Bank Money Onchain Could Take Three Different Forms
One approach would issue reserves directly on a programmable platform. This would place central bank money onchain alongside tokenized securities, deposits and other digital assets.
A second model would keep the ECB’s existing real-time gross settlement infrastructure. An interoperability layer would connect that system with distributed-ledger platforms using linked transaction records.
The third option would tokenize reserves held at the central bank. Private settlement tokens would then be fully backed by those reserves.
Schnabel said tokenization could support programmable and atomic transactions. Atomic settlement allows asset transfers and payments to complete together.
Central Bank Money Onchain Strategy Expands Through Pontes
The ECB has already started testing central bank money onchain through its Pontes initiative. The project launched in September for settlement of tokenized wholesale transactions.
Pontes links DLT market platforms with existing Eurosystem infrastructure. Planned improvements include longer operating hours, decentralized programmability and eventual 24-hour availability.
The ECB is also developing Appia as a longer-term architecture project. Appia examines unified ledgers, interconnected networks and multiple shared-ledger structures.
Schnabel said the two-tier monetary system could remain intact under this model. Central banks would provide the settlement anchor while commercial banks continued supplying private money and financial services.
Private instruments could include tokenized deposits and stablecoins alongside central bank money onchain. The ECB sees these assets as complementary parts of tokenized markets rather than direct replacements.
Lloyds survey data also showed growing institutional interest in tokenization. Some 71% of senior UK financial decision-makers expect it to reshape financial services.
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