ECB Seeks to Issue Euros on Blockchain, Eyes Stablecoin Settlement

The European Central Bank (ECB) is considering issuing euros directly onto a blockchain. ECB Executive Board member Isabel Schnabel made this proposal at the Jackson Hole symposium, and she emphasized that stablecoins are not suitable for settlement purposes.

Schnabel argued that even if a stablecoin can be designed to be very safe, it cannot expand its supply in times of panic when everyone wants cash. A central bank can create more money, but a stablecoin issuer cannot. She compared this issue to the banking panic of 1907, where money was tied to banks' holdings of government bonds and could not be expanded.

The ECB's move is likely driven by the large circulation of dollar-pegged stablecoins, which amount to $304 billion, as opposed to euro-pegged tokens with a market cap under $1 billion. Schnabel stated that if private tokens are used for settlement, Europe would effectively settle in dollars.

The ECB has been exploring blockchain technology through the Pontes project, which will link TARGET Services to market blockchain platforms starting next month. This project aims to enable smart contracts and round-the-clock operation. Schnabel weighed three options: issuing tokens directly, bridging from current systems, or letting a private firm tokenize reserves through an omnibus account.

She favors the first option, which would allow the ECB to run repo operations in code.