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ECB warns digital euro and tokenization could face fragmentation risks

The ECB cautioned that tokenised finance on closed, incompatible platforms could weaken the “singleness of money” without a safe, pan-European settlement asset.

Reported · Written up by our desk · Central Banks

ECB executive Piero Cipollone said the central bank mandate has long included issuing money and safeguarding its value, but payments and finance are increasingly moving to digital forms.

He noted that financial institutions are experimenting with distributed ledger technology, and that assets can be represented as tokens, while new actors are entering markets traditionally served by banks.

Cipollone said digitization could make payments more convenient and finance more efficient, but he warned that if tokenised finance grows on closed, incompatible platforms without a safe settlement asset, fragmentation could increase and the singleness of money could be weakened.

He also argued that if Europe depends excessively on infrastructures, technologies or solutions controlled elsewhere, its resilience and monetary sovereignty could be diminished, and raised the risk of lacking a pan-European digital payment solution for day-to-day transactions.

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