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ECB official says central banks should move money onto DLT for token finance

The ECB’s Isabel Schnabel argued that tokenized finance is constrained by the lack of a safe settlement asset, and said stablecoins still largely rely on settlement solutions based on central bank money.

Reported · Written up by our desk · Central Banks

European Central Bank Executive Board member Isabel Schnabel told the Jackson Hole Economic Policy Symposium that the euro area has an opportunity to expand tokenized finance in wholesale markets by using distributed ledger technology to support common infrastructure for assets and settlement.

Schnabel said the take off of tokenized finance has been held back in part because there is not yet a safe settlement asset, and she argued that settlement solutions based on central bank money continue to dominate, reflecting central banks’ ability to elastically provide liquidity.

She said central banks should embrace DLT and go on chain themselves, arguing that bringing central bank money onto distributed ledgers would preserve its role as the foundation of settlement while also allowing central banks to use ledger programmability to modernize monetary policy implementation, collateral management, and liquidity provision.

The ECB official also raised a design question on how central banks should connect to tokenized markets, weighing the benefits of a more unified ledger approach against challenges for resilience, innovation, and governance.

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