ECB’s Schnabel urges central banks to issue reserves on blockchain

European Central Bank Executive Board member Isabel Schnabel urged central banks to bring their reserves directly onto distributed ledgers, arguing the move would modernize monetary policy and help institutions respond more rapidly to financial stress.

Speaking Friday at the Jackson Hole Economic Policy Symposium, Schnabel said tokenization — representing financial assets as digital tokens on programmable platforms — could reshape wholesale finance but requires a safe settlement asset that only central banks can provide.ecb.europa

"To reap the full benefits, central banks need to go on-chain too," Schnabel said. "That means bringing central bank money into the tokenised environment and modernising the tools of policy implementation."reuters

Stablecoins Cannot Replace Central Bank Money

Schnabel rejected the notion that private stablecoins could serve as the foundation of tokenized finance. While a stablecoin backed by government securities could theoretically be made safe, its issuer lacks the capacity to expand liquidity elastically during periods of market strain, she said.ecb.europa

She drew a historical parallel to the U.S. National Banking System before 1913, when money supply was tied to bank holdings of government bonds and could not expand to meet surges in demand, contributing to financial panics.ecb.europa

Central bank reserves, by contrast, can be supplied elastically against eligible collateral, establishing the credibility of par convertibility between commercial bank deposits — a function no private issuer can replicate.cryptobriefing

Programmable Policy and Europe's Path Forward

Schnabel argued that issuing tokenized reserves natively on distributed ledgers — rather than relying on bridge solutions or private intermediaries — would allow the ECB to conduct monetary policy operations using smart contracts. Citing Project Pine, a joint study by the New York Fed and the BIS Innovation Hub, she said programmable reserves could execute repo transactions atomically, automate collateral management, and allow central banks to adjust parameters such as interest rates with immediate effect.ecb.europa

The ECB is already building toward this vision. Its Pontes initiative, set to launch in September 2026, will connect distributed-ledger platforms to the Eurosystem's TARGET services and eventually support settlement finality on a Eurosystem-operated DLT platform. A parallel effort, Project Appia, is examining longer-term architecture for a European market in tokenized assets, with a blueprint expected by 2028.coindoo+1

Schnabel cited South Korea's Project Hangang as an example of how a unified ledger can replicate the two-tier monetary system, with commercial banks serving end users while the central bank provides the ultimate settlement asset. Whether Europe adopts a single ledger or a network of interoperable platforms remains an open question, she said, with trade-offs between integration and resilience still under discussion.ecb.europa