The European Central Bank is weighing three different technical paths to bring central bank money onto programmable blockchain networks, a question that cuts to the heart of how Europe’s financial plumbing might work a decade from now. Speaking Thursday at the Bank of England’s Future of Money conference in London, ECB Executive Board member Isabel Schnabel laid out the options under consideration, giving the clearest public look yet at how the central bank is thinking through tokenized settlement without disrupting the banking system that already exists. The framework behind these ECB tokenized settlement models matters because it could determine how banks, asset managers and even stablecoin issuers interact with central bank reserves in the years ahead.
Key takeaways
- The ECB is studying three models to bring central bank money onto programmable platforms: direct issuance, a linking layer, and reserve-backed private settlement tokens.
- Schnabel said the ECB wants to preserve the current two-tier monetary structure, keeping central bank money as the core settlement asset while commercial banks still handle deposits and services.
- A Lloyds survey found 71% of senior decision-makers at UK financial institutions expect tokenization to reshape financial services, with faster payments and settlement cited as the top benefit.
- Lloyds and Visa recently piloted stablecoin settlement across blockchain networks, testing round-the-clock payment obligations.
- The ECB is already testing this strategy through two projects, Pontes and Appia, which tackle near-term settlement links and longer-term market infrastructure separately.
ECB’s three models for central bank money on programmable networks
The ECB’s approach boils down to three distinct architectures, each with trade-offs between speed of adoption and how much it changes existing infrastructure. Schnabel presented the options as parallel possibilities rather than a single preferred route, according to her presentation at the conference.
Direct issuance of central bank reserves on programmable platforms
Under the first option, reserves would be issued directly by the central bank on a programmable platform. This is the most straightforward technically, but it would also mark the biggest departure from how central bank money is currently distributed and tracked.
Linking existing real-time settlement systems with distributed ledger technology
Under the second model, the ECB’s existing real-time gross settlement system would stay in place. An interoperability layer would connect it to distributed ledger platforms, with the two systems linked by hash rather than by tokenizing the reserves themselves. This path keeps the current settlement rails largely untouched while still allowing programmable networks to interact with central bank money indirectly.
Private settlement tokens fully backed by the central bank
In the third model, reserves held at the central bank would be tokenized, producing settlement tokens that are fully backed by those reserves. Crucially, these tokens would represent private claims rather than claims issued directly by the central bank itself, a distinction that keeps the central bank’s balance sheet one step removed from the tokens circulating on programmable networks.
Preserving the two-tier monetary system
Whichever design the ECB eventually settles on, officials want to keep the existing two-tier banking structure intact rather than let programmable money sideline commercial banks. According to Schnabel, central bank money would remain the core settlement asset, with commercial banks continuing to offer deposits and financial services to customers just as they do today.
That structure would effectively place central bank money alongside tokenized securities, tokenized deposits and stablecoins on the same or connected distributed ledger networks. In practice, this suggests the ECB is trying to extend the reach of central bank money into tokenized markets without rewiring who does what in the banking system. The ECB is already putting pieces of this thinking into practice through two separate initiatives, Pontes and Appia, which give it room to test near-term fixes while also designing more ambitious long-term infrastructure.
Benefits and market interest in tokenization
Programmable settlement could let an asset transfer and its corresponding payment happen simultaneously, something that matters because it collapses several separate steps currently split between trading systems and settlement systems. Schnabel described this atomicity as one of the core advantages of moving central bank money onto programmable rails, since financial assets and money could interact directly on the same or connected networks.
That promise is already showing up in how banks talk about the technology. A Lloyds survey, its 10th annual Financial Institutions Sentiment Survey shared with The Block, found that 71% of senior decision-makers at the UK’s largest financial institutions expect tokenization to reshape financial services. Faster payments and settlement was the benefit cited most often, named by 60% of respondents, followed by better collateral and liquidity management at 41%. Notably, 77% of respondents said investing in new and emerging technologies is now a growth priority, up sharply from 41% in 2025.
Rob Hale, co-head of global markets at Lloyds, said: “The real opportunity is to make financial markets work faster, more efficiently and with greater flexibility for clients.” He highlighted quicker settlement, more efficient use of collateral, and improved liquidity flow as concrete benefits banks are already pursuing.
Those benefits aren’t just theoretical. Lloyds and Visa recently piloted stablecoin settlement across blockchain networks, moving payment obligations and testing round-the-clock settlement outside normal banking hours. That kind of trial shows banks examining digital money as a complement sitting alongside existing payment systems, rather than rushing to replace those systems outright.
ECB’s technical projects and the regulatory backdrop
The ECB has already started turning parts of its tokenized settlement thinking into working infrastructure. Its Pontes project, which launched last month, connects distributed ledger platforms with central bank settlement infrastructure, providing tokenized central bank money for DLT-based transactions. It represents the near-term, more practical side of the ECB’s strategy.
Appia, by contrast, takes a longer view. The project is examining a unified ledger, interconnected networks, and multiple shared ledgers as possible architectures for future tokenized markets. Together, Pontes and Appia effectively split the ECB’s workload in two: one project tests settlement links that could go live relatively soon, while the other designs the broader market infrastructure that tokenized assets and central bank money might eventually run on.
This work is unfolding against a regulatory backdrop that is still being written. Debate over MiCA stablecoin rules continues to shape how private digital money fits into Europe‘s financial system, and that debate remains very much alive even as the ECB pushes ahead with its own infrastructure experiments. The two tracks, regulatory and technical, are moving in parallel rather than in sequence, which means the final shape of tokenized settlement in Europe will likely depend on how both evolve together.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.