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ECB Executive Board member Isabel Schnabel on August 28 delivered a speech at the Jackson Hole Symposium, proposing that central bank reserve deposits should be made directly usable on blockchain infrastructure. The goal is to eliminate the “mismatch” between tokenized assets and traditional payment systems, while enhancing monetary policy flexibility through smart contract-enabled instant adjustments to interest rates and collateral requirements. The ECB will launch Pontes next month, connecting distributed ledger technology with TARGET, and plans to finalize a blueprint for the long-term Appia initiative by 2028. The retail-focused digital euro remains a separate project, with a pilot involving 36 companies set to begin in 2027.
Key Elements
European Central Bank (ECB) Executive Board member Isabel Schnabel on the 28th delivered a speech at the Jackson Hole Economic Policy Symposium in Wyoming, expressing her view that reserve deposits issued and managed by central banks should be made directly usable on blockchain infrastructure. The aim is to fundamentally overhaul the tools of monetary policy implementation.
In her speech, Schnabel stated that “to reap the full benefits, central banks themselves need to go on-chain,” explaining that placing central bank money on distributed ledgers would allow smart contract-based automated execution to be incorporated into monetary policy while maintaining its role as the ultimate foundation for fund settlement.
Specifically, she noted that central banks would be able to instantly adjust parameters such as interest rates, collateral requirements, and access conditions without establishing new operational frameworks, thereby increasing policy flexibility. Using repo transactions as an example, she outlined a future where additional collateral could be demanded immediately when collateral values plummet, or where eligible collateral substitutions and interest rate changes could be completed entirely within the settlement process.
This initiative is limited to wholesale finance. It is separate from the retail-oriented digital euro and would not create a crypto asset that investors could purchase. The ECB has also not decided on whether to adopt public blockchains.
The “Mismatch” Between Tokenized Assets and Settlement
Schnabel’s concern centers on the current state of affairs where tokenized bonds and securities are traded on distributed ledgers, while the central bank money used for settlement remains on traditional payment infrastructure. When a bank purchases a tokenized bond, ownership of the bond transfers on the ledger, but payment is processed through the existing TARGET system. This creates friction as messages must be exchanged between the two systems to confirm completion of both transfers.
If bonds and payments were placed in the same programmable environment, “atomic settlement” would become possible—ownership transfers simultaneously with payment arrival, and if either leg fails, the entire transaction is canceled. Schnabel emphasized that it is critical for settlement funds to maintain reliability not only in calm periods but also during financial stress, and to be able to supply necessary liquidity.
The structural difference can be illustrated as follows:
Stablecoin issuers operate by minting additional tokens after receiving new reserve assets, meaning they cannot autonomously create central bank reserves during funding shortages. The ECB, by contrast, can supply reserve deposits against eligible collateral. Schnabel acknowledged a role for regulated stablecoins in payments and digital financial services, but maintained that the ultimate settlement asset should remain central bank money.
Pontes and Appia: A Two-Stage Pilot
As the project underpinning this vision, the ECB will launch “Pontes” next month, connecting distributed ledger infrastructure with the existing TARGET service. It will serve as the first operational route enabling tokenized asset transactions to be settled in central bank money.
In the initial phase, legal finality for fund settlement will remain with TARGET2, but the plan is to eventually migrate finality to a ledger operated by the Eurosystem. Smart contract functionality and 24/7/365 operations will be introduced in later stages. The first priority is to assess connection reliability and demand from financial institutions.
The ECB-operated TARGET service (formerly TARGET2, now T2) processed an average of approximately €1.93 trillion in daily settlements in 2025, up 6.7% year-on-year. Pontes will connect to this settlement infrastructure, which handles fund flows of this magnitude on a daily basis.
| Project | Primary Objective | Timeline |
|---|---|---|
| Pontes | Connect distributed ledger with TARGET; settle tokenized assets in central bank money | Launch September 2026 |
| Appia | Examine Europe’s long-term settlement architecture | Blueprint by 2028 |
| Digital Euro Pilot | Technical validation and UX improvement for retail CBDC | Begin H2 2027, 12-month duration |
Note: 36 payment service providers are expected to participate in the digital euro pilot.
Under “Appia,” which examines the long-term framework, three options are being considered: integrating central bank reserves, commercial bank money, and financial assets into a single European ledger; connecting a Eurosystem-operated ledger with private platforms; and a network of multiple interoperable ledgers.
A single ledger avoids liquidity fragmentation but requires clear operational rules and responsibility allocation in the event of disruptions. Multiple networks spread risk and expand room for private-sector competition, but rely on communication reliability between ledgers—if reserve deposits cannot reach where they are needed, liquidity could become fragmented. How to handle confidential information on a shared ledger also remains a challenge.
Schnabel expressed the view that Pontes and Appia will pave the way for tokenization of the European financial system, improving euro area market efficiency and helping to eliminate fragmentation in financial infrastructure.
Global Parallel: BIS “Project Agorá”
The push to bring central bank money on-chain is not limited to the ECB. “Project Agorá,” led by the Bank for International Settlements (BIS) and the Institute of International Finance (IIF), involves seven central banks—the Bank of France (representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and Federal Reserve Bank of New York—along with more than 40 private financial institutions, testing tokenization of cross-border wholesale settlement across multiple currencies.
According to results published by the BIS in May 2026, the prototype demonstrated a mechanism combining tokenized commercial bank deposits and central bank reserves on a single shared platform, confirming settlement completion within seconds of funds being locked. The project is now transitioning from simulation to testing with real funds.
| Initiative | Lead Institution & Participating Central Banks | Scope | Status |
|---|---|---|---|
| Pontes | ECB alone | Euro area; connecting distributed ledger with TARGET | Launch September 2026 |
| Project Agorá | BIS + IIF; 7 central banks (France, Japan, Korea, Mexico, Switzerland, UK, NY Fed) | Multi-currency cross-border wholesale settlement | Prototype complete; transitioning to real transaction testing (May 2026) |
Note: The Bank of Canada also joined Project Agorá as a new participant in May 2026.
While Pontes focuses specifically on connectivity within the euro area, Project Agorá targets wholesale settlement across currencies, positioning the two initiatives as complementary. The progress of both will serve as a litmus test for how far tokenization of central bank money can be implemented on both domestic and international fronts.
Market Interest and Near-Term Focus
Regarding the digital euro, the ECB announced on the 14th that it had selected 36 payment service providers to participate in the pilot scheduled to begin in 2027. The March 2026 call for applications attracted more than 50 submissions, underscoring strong market interest. Participating firms include Revolut Bank, Stripe Technology Europe, and Deutsche Bank.
In Europe, concerns are growing over dependence on major U.S. payment companies and the expansion of dollar-denominated stablecoins championed by U.S. President Trump, accelerating debate over the future of money in the digital age. According to stablecoin tracking site StableCoin.com, as of August 29, 2026, the total stablecoin market capitalization reached approximately $290.5 billion, with Tether’s USDT (63.1% market share) and Circle’s USDC (25.5%) alone accounting for 88.6% of the entire market. Since the vast majority are dollar-denominated, concerns over monetary sovereignty are intensifying among European policymakers.
The immediate focus is on Pontes utilization. The number of participating institutions, types of assets settled, and presence or absence of operational disruptions will indicate whether the project can become as test for Appia’s design decisions and for whether financial institutions will seek central bank money in the same environment as tokenized assets
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Source: finance.biggo.com