ECB Outlines Three Models for Onchain Central Bank Money
The European Central Bank is exploring three approaches to place central bank money onchain. Executive Board member Isabel Schnabel shared the framework on Thursday at the Bank of England’s Future of Money conference. The plans support the ECB’s own DLT projects, including Pontes and Appia, while keeping the current two-tier monetary system intact.
Three Distinct Approaches to Tokenizing Reserves
The first model would let the central bank issue reserves directly on a programmable platform. The second keeps the existing real-time gross settlement system and adds an interoperability layer linked by hash to DLT platforms. Reserves stay untokenized. The third model tokenizes reserves held at the central bank and issues fully backed settlement tokens. These tokens would be private claims rather than direct central bank liabilities.
Keeping the Two-Tier System Alongside Tokenized Assets
Schnabel stressed that central bank money would remain the core of settlement. Commercial banks would continue offering money and financial services to customers. This structure would place central bank money on DLT infrastructure next to tokenized securities, deposits, and stablecoins. The goal is to support programmable and atomic transactions where asset transfer and payment happen together.
Tokenization Gains Momentum as ECB Projects Advance
A Lloyds survey shows 71% of senior decision-makers at major UK financial institutions expect tokenization to reshape services. Faster payments and settlement rank as the top benefit. The ECB has already launched its Pontes project to deliver tokenized central bank money for DLT transactions. Its Appia project is studying architectures such as a unified ledger, interconnected networks, and multiple shared ledgers.
