ECB Tokenized Euro Plan Threatens Stablecoin Dominance

The European Central Bank (ECB) is planning to launch a tokenized euro, which would serve as a direct central bank settlement asset for regulated blockchain markets. ECB Executive Board member Isabel Schnabel argued that stablecoin issuers cannot create liquidity during stress, making them weaker as a final wholesale settlement anchor.

Pontes, the Eurosystem's near-term project, is set to launch in September and will link market ledgers with TARGET Services before moving finality onto a Eurosystem blockchain. The initial model connects market DLT platforms with TARGET Services, allowing participants to settle using cash tokens on a Eurosystem ledger or complete the cash leg in T2.

The ECB could inject liquidity, change collateral rules, or adjust rates within the same environment, which explains Schnabel's preference for directly issued reserves. The tokenized euro would not replace compliant exchange tokens and would initially serve eligible financial institutions and licensed market operators.