European Central Bank (ECB) Executive Board member Piero Cipollone said that tokenized deposits and stablecoins need tokenized central bank money as a public settlement anchor if Europe’s tokenized financial markets are to scale, while pointing to this summer as the expected date for the European standards for the digital euro to be announced.
In a speech to the European Parliament’s Committee on Economic and Monetary Affairs, Cipollone reaffirmed to European Union lawmakers the “vital importance” of advancing the digital euro initiative, to “strengthening EU monetary sovereignty, reduce fragmentation in retail payments and supporting the integrity and resilience of the Single Market.”
He also revealed that Pontes, the Eurosystem’s distributed ledger solution (DLT) solution, will be launched in the third quarter of 2026 to enable central bank money settlement for DLT-based transactions.
Once those standards are announced, the ECB said it will work with market participants so they can begin embedding them into payment terminals and other solutions.
Cipollone appears to be on somewhat of a digital euro press tour, having given another speech the previous day to an event on “Building Europe’s integrated digital asset ecosystem: from vision to implementation” hosted by the House of the Euro, a collaboration hub for the Eurosystem.
In his keynote, Cipollone focused on the benefits of tokenization and the obstacles to achieving a tokenized financial system at scale, namely platform fragmentation and the absence of a common, trusted on-chain settlement asset for transactions on DLT networks.
On the former, Cipollone warned that the status quo of multiple DLT networks operating in parallel, without synchronization or asset transferability between them, fragments liquidity and increases integration costs.
Meanwhile, on the latter, he argued that: “Without tokenised central bank money, a seller of a tokenised security may receive payment in an asset they are not comfortable holding — one exposed to price volatility or credit risk — which limits the market’s ability to scale.”
A safe anchor
According to Cipollone, “central bank money is the safest and most liquid settlement asset,” an unsurprising statement for a central banker to make. Still, he went on to explain his reasoning, that central bank money does not carry any credit or liquidity risk and thus serves as the “monetary anchor” for the financial system.
In terms of how this affects the tokenization space, international standards for financial market infrastructures require settlement to be conducted in central bank money, where practical and available. Therefore, as tokenized markets grow, this anchor must be available in the new technology, in this case, a DLT/blockchain-based central bank money.
“Private settlement assets — whether tokenised deposits or stablecoins — will play a role as commercial bank money does today in traditional finance,” Cipollone explained. “But they require a trusted public anchor to function effectively across the whole tokenised financial market.”
In other words, without the anchoring digital euro, tokenized markets may struggle to develop at the speed and scale that Europe needs, according to the ECB exec.
He added that tokenized central bank money, in the form of the digital euro, can also provide the settlement bridge that makes a private settlement asset convertible to another, enabling tokenized deposits to be transferred between banks or stablecoins to be settled in fiat currency directly on DLT.
“This will allow private innovation to scale with confidence,” said Cipollone.
Impatience with legislation
The day after rhapsodizing on the benefits of a central bank digital currency (CBDC) to the tokenization space, Cipollone gave an equally impassioned sales pitch for the digital euro to the European Parliament’s Committee on Economic and Monetary Affairs.
He told the assembled EU lawmakers that the unique pan-European reach of the ECB’s planned CBDC, of which he has been a longtime advocate, “will enable the private sector to scale up solutions across the euro area, opening doors for companies and payment service providers (PSPs) to trial new business models and expand their customer base beyond national borders.”
He went on to outline how the technical work on the digital euro is progressing steadily through pilot activities and that through the ECB’s engagement with market participants and its work on standards, it was “laying the necessary technical foundations.”
However, he also took the opportunity to remind the assembled members of the EU parliament again that the promise of the digital euro can only be achieved if they get a move on with legislation.
“A clear and timely legal framework would allow us to complete our preparations and it would give market participants, including PSPs and merchants, certainty about what needs to be done for them to be digital euro-ready,” Cipollone said.
He added that the ECB “will only consider issuing the digital euro once the legislation is in place and we would issue it in full compliance with the legislation.”
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Source: https://coingeek.com/digital-euro-vital-for-tokens-stablecoins-ecb-board-member/
