On May 5, 2026, a senior official from the European Central Bank (ECB) emphasized the significant impact that tokenisation and distributed ledger technology (DLT) are having on the financial sector. These technologies are reshaping payment systems and financial services by enabling faster, more efficient, and cost-effective operations. However, the official also pointed out that these innovations bring important challenges and implications for central banks.
The ECB representative described tokenisation as a general-purpose technology that fundamentally changes how financial systems operate. Unlike previous improvements that simply enhanced efficiency within existing frameworks, tokenisation enables assets to be represented as digital tokens on DLT networks. This allows the entire lifecycle of a transaction—such as issuance, trading, settlement, and custody—to take place seamlessly in a continuous digital environment available 24/7.
Despite its advantages, the official warned that realizing the full potential of tokenisation depends heavily on broad market adoption of complementary technologies and standards. This creates a coordination challenge because no single participant can drive transformation alone, and early adopters may face costs without guaranteed benefits. The ECB stressed the importance of deciding on the architecture of DLT ecosystems carefully. A single shared network could prevent fragmentation but might limit competition to services alone. On the other hand, multiple interconnected networks could encourage innovation at the infrastructure level but risk liquidity fragmentation.
To address these issues, common standards and open access to network layers are essential to avoid walled gardens that block new entrants. The ECB outlined two main roles for central banks in this evolving landscape. Firstly, as issuers of central bank money and providers of liquidity against collateral, central banks must supply tokenised central bank money as a secure settlement asset in tokenised markets. The Eurosystem plans to enable such settlement for DLT-based transactions starting September 2026 through its Pontes project. Since March 2026, it has also accepted marketable assets issued via DLT in central securities depositories as collateral for credit operations.
Secondly, central banks serve as catalysts for developing an integrated and competitive tokenised ecosystem. The ECB has introduced the Appia roadmap to encourage cooperation and innovation within this space. The official cautioned against relying solely on private settlement assets like stablecoins for tokenised markets. Without tokenised central bank money, markets may become smaller, fragmented, and less efficient.
The use of stablecoins as the primary settlement asset poses risks to monetary policy transmission, financial stability, and monetary sovereignty. For instance, a shift from traditional bank deposits to stablecoins could increase deposit volatility and concentration, affecting banks’ lending capabilities. Additionally, private payment methods might face sudden redemption pressures if confidence falters, which could be more severe in a digital environment. Furthermore, widespread use of foreign currency-denominated stablecoins could lead to currency substitution, undermining domestic monetary control.
In conclusion, the ECB official stressed that tokenisation and DLT-based markets require central bank money at their core to maintain financial stability and effective monetary policy transmission. Alternative arrangements risk introducing new vulnerabilities and disrupting established frameworks. The Eurosystem remains committed to balancing public money’s role alongside private innovations to ensure a resilient future financial ecosystem.
