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\\ \\ Isabel Schnabel\\ \\ Member of the ECB's Executive Board

Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Jackson Hole Economic Policy Symposium on “Financial Innovation: Implications for Payments and Policy”

It is a great pleasure to discuss Darrell Duffie’s paper “Tokenized finance and the perimeter of central banking” at this year’s Jackson Hole Economic Policy Symposium.\ [1\]

Duffie, D. (2026), “Tokenized Finance and The Perimeter of Central Banking”, paper prepared for the Jackson Hole Economic Policy Symposium on “Financial Innovation: Implications for Payments and Policy”, 8 July. I would like to thank Antoine Lallour for his contributions to this speech.

Tokenisation in wholesale finance has emerged as one of the most promising applications of distributed ledger technology (DLT), allowing financial assets and money to be represented as digital tokens on programmable platforms.

The potential benefits of tokenisation are substantial. This is particularly true for the euro area, as tokenisation presents an opportunity to foster integration by enabling assets and settlement to operate on common infrastructures.

However, as Darrell argues, the take-off of tokenised finance has so far partly been held back by the lack of a safe settlement asset. His paper provides an excellent overview of where central banks stand in filling this gap.

Drawing on the work currently underway in the euro area, I would like to explore three key questions.

First, is central bank money critical for the development of tokenised finance, or could well-designed stablecoins take over the role of a safe settlement asset? My conclusion is very much in line with Darrell’s: stablecoins are dominated by settlement solutions based on central bank money, reflecting in part the unique ability of central banks to elastically provide liquidity.

Second, should central bank money remain outside of distributed ledger platforms, whether by relying on private intermediaries or on bridge solutions? Or should central bank reserves themselves become native programmable assets?

Here I will suggest that central banks should embrace DLT and go on-chain themselves. Bringing central bank money on-chain would not only preserve its role as the foundation of settlement – it would also enable central banks to leverage the programmability of distributed ledgers to modernise monetary policy implementation, collateral management and liquidity provision, thereby also fostering financial stability.\ [2\]

Although central banks have spent decades refining the conduct of monetary policy, the technological infrastructure through which monetary policy is implemented has changed remarkably little. While the settlement infrastructure has been incrementally modernised, such as through faster batch cycles and expanded operating hours, there has been no change in the underlying architecture for monetary policy implementation.

The final question is how central banks should go on-chain. Should central bank reserves be integrated with tokenised assets on one or more shared ledgers? Or should they be issued on a central bank-operated ledger that connects to other platforms?\ [3\]

Shared ledger means that the ledger hosts different kinds of assets. Moreover, access to the ledger is open, i.e. it is not restricted to the owner or operator. One can have a single shared ledger or multiple shared ledgers.

I will argue that the answer to this question depends on the following trade-off: a more unified infrastructure for tokenised financial markets via a single ledger or a small number of large ledgers reduces issues of interoperability and fragmentation. But it also creates challenges for resilience, innovation and governance.

Tokenisation could bring significant benefits to the euro area

Tokenisation offers two closely related benefits for wholesale finance: atomicity and programmability.

Atomicity implies that the legs of a transaction settle together or not at all, thereby eliminating settlement risk. Programmability means that settlement can be made conditional on a set of rules that are executed automatically rather than being processed as a series of manually sequenced steps (Slide 2).