The European Central Bank (ECB) is exploring three approaches for making central bank money available on distributed ledger technology (DLT) platforms as tokenization reshapes financial markets. Executive Board member Isabel Schnabel outlined the strategy on October 1 at the “Future of Money” conference hosted by the Bank of England.

Schnabel argued that central bank money must retain its role as the “monetary anchor” in future payment systems. She then presented options for placing central bank money on-chain alongside tokenized securities, deposits, and other digital assets.

The first approach is what she called “direct issuance.” The central bank would issue reserve deposits directly on a programmable platform. In this scenario, reserves would exist as tokens from the outset and trade on the same ledger as other tokenized assets.

The second is a “bridge” approach. The ECB would maintain its existing real-time gross settlement (RTGS) system while connecting it to DLT platforms through an interoperability layer. Reserves themselves would not be tokenized; instead, transaction records from both systems would be linked via hash values.

The third model relies on private intermediaries. Reserve deposits would remain off-chain at the central bank, while intermediaries issue fully collateralized settlement tokens backed by those reserves. Token holders would hold claims against the intermediary for payment.

Schnabel noted that tokenization enables programmable transactions and atomic settlement—a mechanism that completes asset transfer and payment simultaneously as a single indivisible operation, reducing settlement risk.

Pontes Advances Proof-of-Concept

The ECB has already launched “Pontes,” a proof-of-concept project aimed at bringing central bank money on-chain. The initiative went live in September and will handle settlement for tokenized wholesale transactions. It connects DLT market platforms with the Eurosystem’s existing infrastructure, enabling delivery-versus-payment (DvP) for securities and funds, as well as payment-versus-payment (PvP) across different currencies.

The ECB also published a 116-page user handbook for Pontes’ pilot operations. Plans include extended operating hours, the introduction of decentralized programmability, and eventual 24/7 operation.

Appia Explores Long-Term Architecture

The “Appia” project is tasked with examining longer-term architectural options. It is analyzing choices including a unified ledger, interconnected networks, and multiple shared-ledger structures.

According to Schnabel, the two-tier financial system can be preserved under this model. Central banks would provide the settlement foundation, while commercial banks would continue supplying private money and financial services. Tokenized deposits and stablecoins could coexist alongside central bank money as private financial instruments. The ECB views these assets not as substitutes for central bank money, but as complementary components of the tokenized market.

Interest in tokenization is growing among financial institutions. According to survey data from Lloyds Bank, 71% of senior financial decision-makers in the UK expect tokenization to reshape financial services. The ECB’s current exploration offers a concrete response to the challenge of adapting central bank infrastructure to these market shifts.

Market participants see significant potential for improved settlement efficiency in tokenized securities trading if central bank money moves on-chain. At the same time, the choice of approach could substantially alter the impact on the existing banking system and the division of roles between central banks and private operators. The ECB is expected to refine its strategy incrementally, drawing on results from Pontes and analysis from Appia.