ECB official proposes migrating central bank money to blockchain rails

Isabel Schnabel, an Executive Board member of the European Central Bank (ECB), has proposed that central bank money should migrate onto distributed ledger technology (DLT) to leverage the benefits of tokenization. Speaking at the Bank of England’s ‘Future of Money’ conference, Schnabel outlined how tokenization could transform wholesale financial markets by enabling faster, 24/7 global settlement, reducing counterparty risk through risk-free central bank money, and allowing for programmable automation via smart contracts.

The ECB is evaluating three primary technical models for implementing tokenized settlement: direct issuance of central bank reserves on programmable platforms, the use of interoperability bridges to connect real-time settlement systems with DLT, and private settlement tokens fully backed by central bank reserves.

A key priority for the ECB is preserving the existing two-tier monetary system, where central bank money serves as the primary settlement asset while commercial banks continue to manage deposits and client services. Schnabel noted that tokenization offers a historic opportunity to reduce structural fragmentation within the Eurozone and integrate European financial infrastructures.