The European Central Bank is weighing three technical models for bringing central bank money onto distributed ledger technology networks, a move that could shape how tokenized securities, deposits and other digital financial instruments settle in Europe.
Speaking at the Bank of England’s Future of Money conference in London, ECB Executive Board member Isabel Schnabel said the work forms part of the central bank’s plans to develop infrastructure for tokenized markets through its Pontes and Appia projects. The options range from issuing central bank reserves directly on a programmable platform to linking existing payment infrastructure with DLT networks.
The approach under consideration keeps central bank money at the core of wholesale settlement while allowing commercial banks to continue providing customer accounts, deposits and payment services. That reflects the ECB’s effort to adapt the existing two-tier monetary system to markets where securities and cash may be represented as tokens and transferred through shared digital networks.
Three routes for DLT settlement
The first model would involve the ECB issuing reserves directly on a programmable platform. Such a setup would place central bank money natively on the same type of network used to process tokenized assets, potentially allowing payment instructions and asset transfers to be embedded in automated transaction rules.
A second model would retain the Eurosystem’s current real-time gross settlement infrastructure while connecting it to DLT platforms through an interoperability layer. The ECB’s published presentation said reserves would remain in the existing system rather than being tokenized under this structure.
Instead, a cryptographic hash would link the conventional payment system and the DLT platform. A hash is a unique digital reference generated from data; in this case, it could help coordinate a payment recorded in one system with an asset transaction recorded in another. The design would allow the ECB to support DLT-based settlement without immediately moving its reserves onto a new ledger.
The third option would tokenize reserves held at the central bank and use those reserves to fully back settlement tokens. The tokens used by market participants would be private claims backed one-for-one by central bank money, rather than direct claims on the ECB itself.
That distinction would give private-sector institutions a role in issuing settlement instruments while keeping the underlying central bank reserve balance as the foundation for final settlement. It also presents a more layered structure than direct issuance of tokenized reserves, potentially fitting more easily with existing banking arrangements.
Programmable settlement moves closer to market infrastructure
Schnabel described tokenization as a way to make transactions programmable and atomic. Atomic settlement means that the transfer of an asset and the transfer of payment occur together, reducing the risk that one side completes while the other fails.
In conventional financial markets, securities and payments can move through separate systems and reconciliations. Tokenized arrangements could connect them more tightly, either on a single ledger or through linked networks. A tokenized bond, for example, could change ownership only when the corresponding payment is completed under the same set of conditions.
That capability has drawn attention from banks and market-infrastructure operators because it could shorten settlement processes and reduce the amount of collateral tied up while transactions remain pending. The practical benefit depends heavily on legal design, access rules, interoperability and whether tokenized assets can be used at meaningful scale.
The ECB’s framework envisages central bank money operating on DLT rails alongside tokenized financial assets, including securities and bank deposits, as well as stablecoins. Placing those instruments within connected settlement arrangements would give regulated institutions more ways to transact digitally without relying solely on privately issued payment tokens.
Pontes and Appia test different designs
The ECB has begun testing elements of this strategy through Pontes, which was launched last month to provide tokenized central bank money for DLT-based transactions, according to Schnabel’s remarks. The project gives the Eurosystem a practical environment in which to test how tokenized settlement can work with existing market participants and infrastructure.
Appia is examining the longer-term architecture of tokenized markets. Its work covers several possible models, including a unified ledger, interconnected networks and multiple shared ledgers. Those designs carry different trade-offs: a unified ledger could simplify coordination, while a network of connected platforms may better accommodate the variety of institutions and systems already used across Europe’s financial markets.
The ECB is therefore considering more than a single technical product. It is mapping how central bank settlement could operate across a market likely to include multiple issuers, custodians, asset platforms and payment systems.
Financial institutions focus on speed and liquidity
Financial firms are increasingly focused on tokenization’s operational effects rather than treating the technology as a standalone digital-asset experiment. Lloyds’ 10th annual Financial Institutions Sentiment Survey found that 71% of senior decision-makers at the largest UK financial institutions expect tokenization to reshape financial services.
Faster payments and settlement were identified as the leading potential benefit by 60% of respondents, while 41% cited collateral and liquidity management, according to the Lloyds survey. Those findings align with the ECB’s emphasis on atomic settlement and direct interaction between money and tokenized assets.
The survey also found that 77% of respondents considered investment in new and emerging technologies a growth priority, up from 41% in 2025. Rob Hale, global markets co-head at Lloyds, linked the expected benefits to faster settlement, more efficient collateral use and improved movement of liquidity.
For the ECB, the challenge is to support those efficiencies without displacing the role that central bank money and commercial banks currently play in the financial system. The three models outlined by Schnabel offer different answers to that question: direct central bank issuance on DLT, connection between existing payment rails and DLT platforms, or privately issued settlement tokens fully backed by tokenized central bank reserves.
Explore how central banks and blockchains converge with tokenization in our guide to central bank digital currencies (CBDCs).
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
