European Central Bank Executive Board member Isabel Schnabel said at Jackson Hole that central bank money must move onto blockchain infrastructure, according to information shared by @coinbureau on X. Her comments highlight growing attention among policymakers to blockchain-based financial infrastructure and the potential role of tokenized assets in modernizing settlement systems.

Schnabel's remarks point to a possible shift in how financial institutions could use central bank money as blockchain technology becomes more integrated into financial markets. The proposed approach would allow banks to settle tokenized assets through smart contracts, potentially bringing payment and asset settlement processes onto the same technological infrastructure.

The comments fit within a wider international trend: the Eurosystem has been exploring how central bank money could be used to settle tokenized transactions on distributed ledger technology, and other central banks, including the Bank for International Settlements through its Innovation Hub projects, have examined similar questions. These efforts reflect concern among policymakers that without a central bank money option on new infrastructure, tokenized markets could settle primarily in commercial bank money or stablecoins, changing the risk profile of financial settlement.

ECB Focuses on Blockchain-Based Financial Infrastructure

Central banks and financial institutions have increasingly examined blockchain technology as a potential foundation for new forms of financial market infrastructure. Tokenization allows assets represented on traditional financial systems to be issued and transferred in digital form on blockchain networks.

Schnabel's comments at Jackson Hole place central bank money within that broader discussion. Central bank money is generally used by financial institutions to settle obligations between banks, which makes its integration with blockchain-based systems an important consideration for tokenized financial markets.

According to the information shared by @coinbureau, Schnabel said central bank money must move onto blockchain infrastructure. The objective described in the update is to enable banks to settle tokenized assets instantly through smart contracts. Such infrastructure could connect the transfer of a tokenized asset with the corresponding payment process, rather than requiring the two elements to be completed through separate systems.

Smart Contracts Could Support Instant Settlement

Smart contracts are programs deployed on blockchain networks that can automatically execute predefined instructions when specified conditions are met. Their use in financial markets could allow transactions involving tokenized assets and payments to be coordinated through automated processes.

Integrating central bank money with blockchain infrastructure could therefore provide banks with a way to settle tokenized assets using digital representations of central bank funds. The concept is particularly relevant as financial institutions explore tokenization across a range of traditional assets, from bonds and funds to deposits. Moving settlement onto blockchain infrastructure could create a more integrated environment in which asset transfers and payments occur through compatible digital systems.

However, implementing such infrastructure would require financial institutions and policymakers to address issues including technical interoperability, operational resilience, regulatory requirements, and the design of systems capable of supporting large-scale financial transactions.

Blockchain Could Reshape Financial Settlement

Schnabel's comments also connect blockchain infrastructure with the broader modernization of financial settlement and monetary policy. Traditional financial markets often rely on multiple systems and intermediaries to process asset transfers, payments, and settlement. Blockchain-based infrastructure offers a different architecture in which transaction records and programmable settlement mechanisms can operate within a shared digital environment.

For central banks, the development of tokenized financial markets raises questions about how central bank money should interact with these emerging systems. Ensuring that banks can access central bank money while using blockchain-based financial infrastructure could become an important part of the evolution of tokenized markets.

The comments attributed to Schnabel indicate that the ECB is considering the implications of this technological shift as blockchain-based financial applications develop. The discussion does not mean that all central bank money or financial settlement has already moved onto blockchain infrastructure. Instead, it reflects an ongoing policy and technological debate over how central bank money could support tokenized assets and blockchain-based financial markets. What to watch next is whether the Eurosystem moves from exploration toward concrete pilot infrastructure for settling tokenized assets in central bank money, and how other central banks respond to the same question.

Source: Hokanews