ECB Explores Central Bank Money Onchain Amid Tokenization Growth

The European Central Bank (ECB) is exploring ways to bring central bank money onchain. ECB Executive Board member Isabel Schnabel outlined three approaches for bringing central bank money onchain at the Bank of England’s Future of Money conference in London.

The first model would involve the central bank issuing reserves directly on a programmable platform. The second option would keep the ECB's existing real-time gross settlement system in place and link it to DLT platforms through an interoperability layer, with reserves not tokenized themselves but connected to the other system by hash.

The third model would tokenize reserves held at the central bank and issue settlement tokens fully backed by those reserves. Schnabel said that an onchain monetary system can retain today's two-tier structure, where central bank money remains the anchor for settlement while commercial banks continue to serve customers and operate alongside tokenized securities, deposits, and stablecoins on DLT infrastructure.

Lloyds' Financial Institutions Sentiment Survey found that 71% of senior decision-makers at the UK's largest financial institutions expect tokenization to reshape financial services. Faster payments and settlement are cited as the biggest potential benefit by 60% of respondents.