ECB Aims for Euro on Blockchain, Questions Stablecoin Settlement

The European Central Bank (ECB) is considering issuing euros directly onto a blockchain. Isabel Schnabel, an Executive Board member, made this case at the Jackson Hole symposium last week. She emphasized that stablecoins should not be used as settlement money, but rather as complements to central bank-issued currencies.

Schnabel argued that in times of crisis, a central bank can create more money to meet demand. However, a stablecoin issuer cannot do the same. This is because stablecoins are tied to their underlying assets, which may not be sufficient to meet the needs of the market during a panic.

The ECB's proposal is part of its Pontes project, which aims to link TARGET Services, the eurozone's settlement backbone, to market blockchain platforms. The project has already tested its pipes, with 64 institutions across nine jurisdictions running 58 use cases and settling nearly €1.6 billion in central bank money.

Schnabel weighed three options for implementing a tokenized exchange: issuing tokens directly, bridging from existing systems, or letting private firms tokenize reserves through an omnibus account. She prefers the first option, which would allow the ECB to run repo operations in code and maintain control over the system.