ECB Executive Lays Out Three Models for Central Bank Money On Chain

Isabel Schnabel, a member of the European Central Bank's (ECB) Executive Board, presented a roadmap for moving central bank reserves onto distributed ledger technology (DLT). At the 'The Future of Money' conference, she outlined three models for tokenizing central bank money. The ECB has already taken steps towards onchain settlement with its Pontes project, which connects market-run DLT networks to the ECB's infrastructure.

Schnabel mapped Europe's securities infrastructure, highlighting its fragmentation and arguing that tokenization could pull these pieces together. She defended the hierarchy of commercial banks issuing deposits backed by central bank reserves, citing historical evidence from the Panic of 1907 and the COVID-19 shock. Central bank money still beats stablecoins in this regard, she claimed.

The ECB's taxonomy for onchain assets sorts digital assets into two broad categories: settlement assets (like retail and wholesale central bank digital currencies) and trading and investment assets (held for yield or speculation). Schnabel laid out three architectures for tokenizing central bank money, each with its trade-offs in control, flexibility, and technical complexity.