ECB Explores On-Chain Central Bank Money Through Tokenization
The European Central Bank (ECB) is exploring ways to bring central bank money on-chain through tokenization. ECB Executive Board member Isabel Schnabel outlined three approaches at the 'Future of Money' conference hosted by the Bank of England.
The first approach, called 'direct issuance,' involves issuing reserve deposits directly on a programmable platform, allowing reserves to trade alongside other digital assets. The second option is a 'bridge' model, where the ECB maintains its existing real-time gross settlement (RTGS) system while connecting it to DLT platforms through an interoperability layer.
The third approach relies on private intermediaries, who would issue fully collateralized settlement tokens backed by central bank reserves. Schnabel noted that tokenization enables programmable transactions and atomic settlement, reducing settlement risk.