ECB Explores Three Models for Tokenizing Central Bank Money

The European Central Bank (ECB) is exploring three models to bring central bank money onto blockchain infrastructure. ECB Executive Board member Isabel Schnabel outlined the options at the Bank of England’s Future of Money conference in London.

The first option would involve the central bank issuing reserves directly on a programmable platform. The second model would keep the existing real-time gross settlement system unchanged, while adding an interoperability layer connecting it with DLT platforms. Reserves themselves wouldn't be tokenized, but systems would be linked through cryptographic mechanisms.

The third option involves tokenizing reserves held at the central bank and issuing settlement tokens fully backed by those reserves. However, such tokens would represent private claims rather than direct liabilities of the central bank.

Schnabel also explained how the current two-tier monetary system could be preserved, with central bank money remaining at the core of settlement and commercial banks continuing to provide money and financial services to customers.