European Central Bank Executive Board member Isabel Schnabel has argued that central bank reserves must move onto blockchain infrastructure to support the growth of tokenized financial markets. Speaking at the Jackson Hole Economic Policy Symposium, she made the case that only central bank money can serve as the ultimate settlement asset in a digital environment, while private alternatives fall short during periods of stress.

Schnabel focused on wholesale reserves used by banks and financial institutions for interbank settlement rather than retail holdings or consumer accounts. She stated that tokenized markets require an asset that only a central bank can create and expand as needed.

She noted that while stablecoins can be structured with strong backing, private issuers lack the independent capacity to expand liquidity rapidly when markets face pressure. Drawing on the 1907 banking panic in the United States, Schnabel recalled how a money supply constrained by bank holdings of government bonds proved inadequate until the Federal Reserve Act of 1913 addressed the shortfall.

Dollar Dominance and the Scale of Stablecoins

The disparity in market size adds urgency to the European position. Dollar-pegged stablecoins currently circulate at roughly $304 billion, according to available data, while euro-denominated stablecoins remain below $1 billion. Schnabel and other central bankers have warned that allowing private tokens to dominate settlement could result in European transactions clearing in dollars, with implications for monetary control.

Central bank money retains advantages as the risk-free settlement asset. Programmability on distributed ledgers could enable more flexible monetary policy tools, including differentiated interest rates, automated collateral management, and faster liquidity provision during stress.

Near-Term Bridge: Project Pontes

The Eurosystem is preparing to advance these ideas through concrete infrastructure. Project Pontes is scheduled to launch in September 2026. It will connect TARGET Services, the eurozone’s existing settlement backbone, with distributed ledger technology platforms operated by market participants.

Earlier trials conducted between May and November 2024 involved 64 institutions across nine jurisdictions. Participants ran 58 use cases and settled nearly €1.6 billion in central bank money. Under the initial phase of Pontes, cash finality will remain within TARGET2. Support for smart contracts and continuous 24/7 operations is expected to follow later stages.

Schnabel outlined three possible approaches for placing reserves on-chain: direct issuance of central bank tokens, bridging existing systems to blockchain platforms, or allowing private entities to tokenize reserves via omnibus accounts. She favored direct issuance, arguing that the other routes would leave the central bank less able to conduct operations such as repos in programmable form.

Longer-Term Architecture Under Project Appia

A parallel initiative, Project Appia, is examining the broader architecture needed for a European tokenized asset market. Work includes technical standards, legal frameworks, and the choice between a single shared ledger and an interconnected network of platforms. A full blueprint is targeted for 2028.

Since March 2026 the ECB has accepted certain DLT-based assets as eligible collateral for its credit operations. European issuers have placed nearly €4 billion in DLT-based instruments since 2021, indicating gradual market development alongside the official projects.

Schnabel’s remarks form part of a wider shift among central banks confronting the rise of tokenized finance. By placing its own money on the same rails as private assets, the Eurosystem aims to preserve the foundational role of central bank reserves while enabling faster, safer, and programmable settlement across the euro area.