The European Central Bank has set out three possible architectures for running central bank money on distributed ledger infrastructure, in the clearest sign yet that the eurozone’s monetary authorities intend to coexist with tokenized finance rather than wall it off.
Isabel Schnabel, a member of the ECB’s Executive Board, presented the framework on Thursday at the Bank of England’s Future of Money conference in London. It comes as the ECB’s Pontes and Appia projects move from research into live pilots, and as commercial banks and asset managers across Europe prepare tokenized securities offerings under the MiCA regime.
Schnabel’s framing matters because it answers a question regulators had dodged for two years: if Europe’s bond issuers and fund managers move settlement onto blockchains, where does the cash side of the trade live? Money on a distributed ledger that is only a commercial claim leaves a gap at the point where safety matters most.
Three models, one hierarchy
The first model is the boldest. The central bank would issue reserves directly on a programmable platform, giving banks ready access to Eurosystem money inside the ledger where securities settle. Functional equivalence with today’s reserve accounts would be the test.
The second keeps today’s real-time gross settlement system in place and adds an interoperability layer connecting it to DLT platforms. The reserves themselves would not be tokenized. Instead, the two systems would be linked by hash, an approach that avoids redesigning the ECB’s settlement core but accepts some friction at the bridge. It is the option likeliest to be deployed first, precisely because it changes least.
The third model sits in the middle. Reserves held at the central bank would be tokenized, and fully backed settlement tokens issued against them. Schnabel was careful to note that those tokens would be private claims, not direct claims on the central bank. That distinction preserves the legal boundary between central bank money and commercial claims, a line the ECB has defended throughout its digital euro work.
Keeping yesterday’s monetary system
Across all three models, Schnabel insisted the two-tier structure of the eurozone’s monetary system stays intact. Central bank money remains at the core of settlement, while commercial banks continue to provide money and financial services to customers.
That design would place central bank money on DLT infrastructure alongside tokenized securities, tokenized deposits and stablecoins. Schnabel told the conference that tokenization can make financial transactions more programmable and atomic, allowing the transfer of an asset and its payment to happen together. Under present arrangements, that link is what settlement fails and delivery-versus-payment mismatches are made of.
The practical groundwork is already running. The ECB’s Pontes project launched last month to provide tokenized central bank money for DLT-based transactions. Appia, its companion project, is examining different architectures for tokenized markets, weighing a unified ledger against interconnected networks and multiple shared ledgers. Appia has not picked a winner, and the ECB has given no date for one.
| ECB model | How it works | Key trade-off |
|---|---|---|
| Direct on-platform reserves | Central bank issues reserves directly on a programmable DLT platform | Boldest change, steepest redesign of the settlement core |
| Hash-linked RTGS | Existing RTGS stays, interoperability layer links it to DLT by hash | Minimal redesign, reserves never tokenized, some bridge friction |
| Backed settlement tokens | Reserves tokenized, fully backed settlement tokens issued as private claims | Programmable and liquid, but claims are not on the central bank itself |
UK banks are moving the same way
The ECB’s framework lands alongside survey data showing how far institutional sentiment has shifted. In Lloyds’ tenth annual Financial Institutions Sentiment Survey, 71 percent of senior decision-makers at Britain’s largest financial institutions said they expect tokenization to reshape financial services. Faster payments and settlement were named the biggest potential benefit by 60 percent of respondents, with collateral and liquidity management next at 41 percent. Investment in new technologies is a growth priority for 77 percent of respondents, up from 41 percent last year.
“The real opportunity is to make financial markets work faster, more efficiently and with greater flexibility for clients,” Rob Hale, co-head of global markets at Lloyds, said in the survey material. He pointed to faster settlement, more efficient use of collateral and better movement of liquidity as benefits institutions can already see.
Where the ECB has been
The ECB’s interest in onchain settlement did not start this week. Schnabel has argued since 2024 that Europe needs a consolidated ledger for wholesale settlement, warning that a patchwork of fragmented ledgers would pull liquidity apart and weaken the role of central bank money. The three models presented in London are the design menu for resolving exactly that concern.
European digital bond pilots have run into the cash-leg problem repeatedly. Marketable issuers can place bonds on DLT, but settling them in central bank money has required workarounds among central bank accounts. Each workaround is fine individually. Together they are the fragmentation Schnabel has warned about.
What it means for crypto markets
For stablecoin issuers and DeFi builders, the ECB’s approach cuts both ways. Recognition that tokenized central bank money belongs on DLT infrastructure beside stablecoins is a serious endorsement of the rails. Europe is treating blockchains as legitimate financial plumbing, not as a novelty to be contained.
But Schnabel’s insistence on the two-tier system, and her note that settlement tokens would be private claims rather than central bank liabilities, signals that the Eurosystem does not intend to hand issuers a eurozone equivalent of permissionless digital cash. The ECB keeps the finality, banks keep the customer relationship, and anything calling itself money onchain that is not a Eurosystem liability stays in a different legal box.
The pressure on faster settlement is not hypothetical. European bond issuers have already run digital bond placements through Pontes pilots, and market participants have been explicit that programmable delivery-versus-payment only works when the cash leg settles in something as liquid and final as central bank money. The ECB’s three models are, in effect, the menu for how that finality arrives.
No decision or timetable accompanies the outline. Appia is still weighing ledger architectures, and a single eurozone option has not been selected. But the direction of travel is clear: the ECB expects tokenized markets to grow and wants central bank money present when they do.