Central banks should adopt distributed ledger technology and bring their money on-chain themselves rather than relying on stablecoins or intermediaries, Isabel Schnabel of the European Central Bank said at the Jackson Hole Economic Policy Symposium. Tokenisation in wholesale finance—representing financial assets and money as digital tokens on programmable platforms—has emerged as a promising application of the technology, but uptake has been held back partly by the lack of a safe settlement asset, Ms Schnabel noted.
Stablecoins, while potentially useful, are dominated by settlement solutions based on central bank money and cannot match central banks' unique ability to provide liquidity elastically, Ms Schnabel said. Bringing central bank money onto blockchain networks would preserve its role as the foundation of settlement while enabling central banks to use the programmability of distributed ledgers to modernise monetary policy implementation, collateral management and liquidity provision, she argued.
Tokenisation offers two main benefits for wholesale finance: atomicity, meaning transaction legs settle together or not at all, eliminating settlement risk; and programmability, allowing settlement to be made conditional on automatically executed rules rather than manual steps. These benefits are particularly large in cross-border transactions, where tokenisation could reduce the operational friction of pre-positioning collateral overnight and improve collateral mobility, Ms Schnabel said.
Europe's financial infrastructure remains fragmented along national lines, limiting scale, competition and cross-border capital flows. Tokenisation on a unified or small number of large ledgers offers a route to an integrated ecosystem, though central banks would need to weigh this against potential challenges for resilience, innovation and governance, she said.
