ECB's Isabel Schnabel Sets Out Three Models to Bring Central Bank Money On-Chain
Key Takeaways
- •ECB Executive Board member Isabel Schnabel presented three models for placing central bank money on-chain during a speech at the Bank of England's "Future of Money" conference on October 1.
- •Settling tokenized transactions in central bank money would preserve its traditional safety, whereas heavier reliance on privately issued instruments would embed issuer credit risk into on-chain settlement.
- •The ECB moved its digital euro project into a preparation phase in November 2023 and is separately running exploratory trials with commercial banks on wholesale settlement of tokenized transactions.
- •The Bank of England, which hosted the conference, is studying a potential digital pound and engaging with asset tokenization as private instruments such as stablecoins gain traction in markets.
- •Schnabel, who has served on the ECB's six-member Executive Board since December 2019, framed the on-chain options as both the retail and wholesale digital money workstreams continue.
European Central Bank (ECB) Executive Board member Isabel Schnabel set out three models for bringing central bank money on-chain in a speech delivered at the Bank of England's “Future of Money” conference on Thursday, October 1.
Tokenization Drives the Debate
The remarks arrive as the tokenization of securities, bank deposits and stablecoins gathers pace, pushing policymakers to confront a core question for the financial system: how can central bank money, traditionally regarded as the safest settlement asset, remain embedded in blockchain-based market infrastructure? The ECB official's speech also kept Bitcoin (BTC) in focus, as the discussion of tokenized finance unfolds alongside the expanding footprint of crypto assets in global markets.
How that question is resolved bears directly on market structure: settling in central bank money would preserve the safety characteristics traditionally associated with it, while heavier reliance on privately issued instruments would embed issuer-related credit considerations into on-chain settlement.
ECB's Ongoing Work on Digital Money
Schnabel, who has served on the ECB's six-member Executive Board since December 2019, has been closely involved in the euro area's research into the future of money. During her tenure, the ECB moved its digital euro project into a preparation phase in November 2023, examining how a potential central bank digital currency (CBDC) could function for retail payments, while separately running exploratory trials with commercial banks on settling tokenized transactions in wholesale central bank money. Set against that backdrop, her three-model framework maps the options available for keeping on-chain transactions anchored to central bank money as both the retail and wholesale workstreams continue.
Central banks beyond the euro area are grappling with similar issues. The Bank of England, which hosted the conference, has been studying a potential digital pound and engaging with the tokenization of financial assets, reflecting a broader shift in which privately issued instruments such as tokenized deposits and stablecoins are gaining traction in financial markets. With the digital euro preparation phase and the digital pound study both under way, the evolving design choices at the ECB and the Bank of England remain the concrete markers to follow as the tokenization debate moves forward.
This report was first published by COINOTAG: ECB Sets Out Three Models to Put Central Bank Money On-Chain, Bitcoin (BTC) in Focus
