ECB Proposes Blockchain-Based Bank Reserves

European Central Bank (ECB) Executive Board member Isabel Schnabel has proposed moving bank reserves to blockchain technology. This move aims to integrate central bank money with distributed ledger technology (DLT) and enable direct issuance of tokenized reserves.

The focus is on wholesale settlements, which are funds that commercial banks hold in ECB accounts for interbank payments. The ECB is exploring three models to achieve this: the first involves direct issuance of tokenized reserves on a programmable platform; the second retains the real-time gross settlement (RTGS) system and links it with DLT platforms; and the third uses a private intermediary.

Schnabel believes that native tokenization of reserves will allow central bank money to remain the ultimate risk-free settlement asset while gaining the programmability of new infrastructure. The ECB is already implementing part of this concept through Pontes, which combines a bridge between market DLT platforms and the TARGET Services with the Eurosystem's own DLT infrastructure.