ECB Plans Euro Blockchain Issue, Threatening Stablecoin Supremacy

The European Central Bank (ECB) is planning to issue euros directly onto a blockchain, according to Isabel Schnabel, an executive board member. This move has sparked concerns about the future of stablecoins in Europe. Stablecoins are digital tokens pegged to the value of a fiat currency, such as the euro.

Schnabel argued that during times of panic, people want cash at once, and only central banks can create more of it. She used the 1907 banking panic as an example, where money was tied to banks' holdings of government bonds, limiting the expansion of the money supply. The Federal Reserve Act of 1913 fixed this issue.

The ECB's Pontes project aims to link market blockchain platforms to TARGET Services, the eurozone's settlement backbone. This will enable atomic settlement in central-bank money and move towards 24/7, programmable, multi-currency settlement. In May-November 2024, 64 institutions across nine jurisdictions tested the pipes and settled nearly €1.6 billion in central bank money.

Schnabel favors issuing tokens directly, while other routes involve bridging from existing systems or letting private firms tokenize reserves through an omnibus account. The latter two options would leave the ECB outside and unable to run repo operations in code.