ECB Executive Board member Isabel Schnabel has presented three models for putting central bank money on the blockchain. Speaking in London in early October 2026, she outlined options ranging from directly tokenized reserves to privately issued settlement tokens fully backed by central bank money — the latter of which would remain private claims rather than direct claims on the central bank.

The context: tokenization meets central bank money

The Eurosystem, which consists of the European Central Bank (ECB) and the national central banks of the euro area, runs the accounts through which banks make final settlement of payments among themselves. The balances held on these accounts constitute central bank money and therefore count as the safe basis for settlement. In tokenization, assets such as bonds or deposits move onto blockchain-based registers known as DLT (distributed ledger technology) platforms. What remains open, however, is the form in which central bank money arrives on those platforms.

Schnabel presented her slides, titled "Central banks on-chain," at the Bank of England (full presentation PDF). The occasion was the conference "The Future of Money," held in honor of economist Charles Goodhart. Ten days earlier, the Eurosystem had launched Pontes, the first initiative of its program for tokenized financial markets (official announcement). At launch, four DLT operators had joined: Axiology, Cashlink, Clearstream and SWIAT. Thirteen market participants and the Deutsche Bundesbank take part as well. Furthermore, the separate Appia initiative is due to deliver a blueprint for the long-term architecture by 2028.

Three models for central bank money on the blockchain

Schnabel argued that moving onto the blockchain could also allow central banks to modernize how they implement monetary policy. The three variants differ in whether reserves exist on-chain and who represents them there. Reserves, in this context, means the balances that commercial banks hold at the central bank. The choice among the models matters because it determines on what terms — and with what degree of central bank backing — banks would be able to hold and move money on DLT platforms.

In the first model, the central bank issues these balances directly on a programmable platform, meaning they exist there as tokens from the outset.

The second model leaves the central bank's existing real-time gross settlement system (RTGS) untouched. Reserves therefore remain in non-tokenized form, while an interoperability layer connects the RTGS with the DLT platform. The slides name a trigger and a so-called hash link as the connection mechanisms, both of which tie activity on the platform back to the balances held in the existing system.

In the third model, a private intermediary tokenizes reserves that themselves remain off-chain at the central bank. On this basis, the intermediary issues settlement tokens fully backed by central bank reserves. For the holder, such a token is still a private claim and not a direct claim on the central bank — a feature shared by neither of the other two models. In practical terms, the token's standing depends on the intermediary honoring its full backing, whereas under the first two models the holder's claim runs directly against the central bank.

Preserving the two-tier monetary system

Today's monetary system rests on two tiers. Customers pay with deposits at their commercial banks, while banks settle balances among themselves in central bank money. The two forms of money stand at a fixed one-to-one ratio, and the slides describe the public tier as safe, trustworthy and scalable.

In Schnabel's view, a tokenized system can reproduce this structure if bank money is available on-chain. Alongside reserves, bank deposits would then exist in tokenized form as well, at an unchanged one-to-one ratio. Under this condition, central bank money would remain the core of settlement, and commercial banks would continue to supply their customers with money and financial services.

Atomic settlement as the ECB's core argument

According to the ECB, tokenization enables faster, safer and smarter settlement. Two properties underpin this argument. Atomicity means that the payment and the security in a trade change hands together or not at all, so neither side risks delivering an asset and receiving nothing in return. Programmability, in addition, ties settlement to predefined rules that apply automatically; a payment, for example, flows only once an agreed condition occurs.

The ECB's stated goal is to preserve the anchor role of central bank money in a digitalized world. One slide illustrates how modern central banks can expand liquidity elastically to cushion financial stress by contrasting two charts. The first shows the rate on stock-secured call loans at the New York Stock Exchange during the Panic of 1907, with the peak marked on October 24, 1907. The Fed was only created in 1913, so the United States had no central bank at the time. Next to it sits a chart covering the Covid-19 pandemic, plotting the money market repo rate and the ECB's balance sheet as a percentage of euro area GDP.

The presentation also suggests that tokenization could integrate Europe's financial infrastructures more closely, with central bank money sitting on DLT infrastructure alongside tokenized securities, deposits and stablecoins.

Public and private settlement assets

On the slides, a settlement asset is defined as whatever a recipient accepts for the final discharge of a liability. Schnabel distinguishes between public and private variants. On the public side sits digital central bank money: for retail customers, this means the digital euro project, while Pontes and Appia serve the wholesale segment. The private side, by contrast, covers tokenized bank deposits and stablecoins. Tokenized bonds and shares are assigned to trading and investment assets, while Bitcoin and Ether fall into the same group as unbacked crypto assets. The classification draws its line according to what stands behind each asset — the same consideration behind the ECB's stated aim of keeping central bank money as the anchor of settlement.

The Eurosystem's two-track DLT strategy

The Eurosystem is pursuing a two-track strategy in which Pontes covers the short-term track. Pontes links DLT platforms to the Eurosystem's TARGET services, allowing market participants to settle wholesale transactions in tokenized assets in central bank money. According to Schnabel's slides, the system combines a bridge solution with a DLT of the Eurosystem's own. Settlement runs either via T2, the existing RTGS, or via DLT, and the system connects market networks for tokenized securities, deposits or stablecoins. Round-the-clock operation and decentralized programmability are due to follow later.

The 13 market participants include Deutsche Bank, Santander, Société Générale, KfW and the European Investment Bank. DZ Bank, Deka Bank, BayernLB, NRW.BANK and the Caisse des Dépôts et Consignations also take part, and ABANCA, Cecabank and Memo Bank complete the list. More participants are due to join in the coming months.

Appia, on the other hand, covers the long-term track. The Eurosystem is driving the project together with Danmarks Nationalbank and partners from the public and private sectors, with experiments and analysis forming the basis of the blueprint. A separate slide shows which architectures Appia is examining: a single ledger, connected networks of a Eurosystem DLT and market DLTs, and several shared ledgers. In each case, the chart separates wholesale central bank money from financial assets such as securities, deposits and stablecoins. In parallel, the ECB continues work on the digital euro for retail customers as a separate project.

The ECB plans to invest its own funds in tokenized securities

Alongside the Pontes launch, the ECB announced that it would become a user of the infrastructure itself. It intends to invest a small portion of its own funds in tokenized securities and settle them via Pontes. Initially, the focus is on euro-denominated securities from central governments, regional governments, agencies and supranational institutions. The ECB named no amount or date, however, and the details will ultimately be decided by the ECB's Executive Board, of which Schnabel is a member. For what comes next, the fixed points are these pending decisions and the Appia blueprint due by 2028.

A survey by Lloyds Banking Group of 100 executives at large UK financial institutions points in the same direction. For the tenth edition of its annual survey, conducted between April and May 2026, Lloyds polled respondents from banks, insurers, financial sponsors and asset managers. A majority of 71% expect tokenization to reshape financial services, while 60% see the biggest benefit in faster payments and settlement. In addition, 77% named investment in new technology as a growth priority, up from 41% the year before, and 64% of respondents plan higher capital expenditure over the next twelve months. Read against the Eurosystem's infrastructure work, the survey adds a demand-side signal: the institutions such infrastructure is meant to serve report rising technology budgets.

Source: Crypto Valley Journal