Isabel Schnabel, European Central Bank Executive Board member, called on central banks to integrate their money into distributed ledger technology (DLT) platforms to support the development of tokenized finance.
Speaking at the Jackson Hole Economic Policy Symposium on August 28, 2026, Schnabel emphasized that tokenization—representing financial assets and money as digital tokens on programmable platforms—offers substantial benefits, particularly for the euro area. These include atomic settlement, where transaction legs settle simultaneously, and programmability, which automates processes such as collateral substitution and margin management through smart contracts. Schnabel noted that these benefits are especially pronounced in cross-border transactions, where programmable settlement could reduce operational frictions and improve collateral mobility across time zones.
Schnabel addressed three key questions regarding tokenized finance. First, she argued that central bank money remains critical as a safe settlement asset, as stablecoins—though promising—lack the liquidity provision capabilities of central bank reserves. Second, she advocated for central banks to embrace DLT by bringing their money "on-chain," suggesting this would preserve the role of central bank money as the foundation of settlement while enabling modernized monetary policy implementation, collateral management, and liquidity provision. Third, she explored the trade-offs between integrating central bank reserves with tokenized assets on shared ledgers versus issuing them on a central bank-operated ledger connected to other platforms, highlighting the need to balance interoperability with resilience, innovation, and governance.
Schnabel also highlighted tokenization’s potential to lower barriers to entry for infrastructure providers, firms, and investors. For example, France’s "Lightning Stock Exchange" (Lise) demonstrates how tokenization can support new trading venues tailored to smaller companies by reducing operational costs. Additionally, tokenization enables fractional ownership, allowing investors to gain exposure to assets like gold bars or real estate that would otherwise require substantial minimum investments.
Addressing the euro area’s fragmented financial infrastructure, Schnabel noted that tokenization could align with the objectives of a European savings and investments union by integrating markets through a common design rather than stitching together national systems. She cited the Eurosystem’s TARGET2-Securities (T2S) platform as an example of how atomic settlement and automated processes already function in domestic markets, though tokenization could generalize these benefits across borders.
Schnabel concluded that while tokenization changes the technology of money and asset transfers, it does not eliminate the need for an institutional framework that preserves par convertibility and monetary stability. She stressed that tokenized systems must either replicate existing monetary plumbing or build new, robust frameworks to ensure stability and trust.
The speech underscored the ECB’s ongoing exploration of DLT and tokenized finance, positioning central bank involvement as essential to unlocking the technology’s full potential while maintaining financial stability.
