The European Central Bank (ECB) is moving euro reserves toward blockchain settlement after €1.6B in trials, while Isabel Schnabel says stablecoins should remain complements.
Key Points:
- The ECB wants central bank reserves to become native programmable assets for tokenized financial markets.
- Project Pontes is set to launch in September, initially keeping cash settlement finality in TARGET2.
- Schnabel argues stablecoins cannot match a central bank’s ability to expand liquidity during periods of financial stress.
ECB Blockchain Euro
In an Aug. 28 speech at the Jackson Hole Economic Policy Symposium, ECB Executive Board member Schnabel said central banks should bring reserves directly onto distributed ledgers.
She argued that tokenized finance needs a settlement asset that remains safe while expanding when liquidity demand rises.
The Eurosystem plans to take a practical step in September with Project Pontes, which will connect market DLT platforms to TARGET Services and add a Eurosystem-operated ledger for central bank money. Legal finality for the cash leg will remain in TARGET2 at launch.
Pontes is expected to add smart contracts and 24/7 operations later, extending the project beyond a simple bridge between conventional payment infrastructure and blockchain-based markets.
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Schnabel Stablecoin Case
Schnabel said stablecoins can support digital payments, but she rejected the idea that they can replace central bank reserves as the financial system’s ultimate settlement asset. “Stablecoins are best understood as complements to central bank money, not substitutes for it,” she said.
Her argument closely followed economist Darrell Duffie, whose Jackson Hole paper compared private stablecoins with central bank reserves and emphasized the importance of elastic liquidity. A stablecoin could be designed with strong safeguards, Schnabel said, but its issuer cannot create liquidity independently during a panic.
That distinction matters as tokenized finance grows across Europe and dollar-linked stablecoins continue to dominate the private market. DefiLlama puts total stablecoin market capitalization near $304.6B, while the ECB is building a public settlement option for tokenized euro markets.
The push also builds on Eurosystem tests conducted during six months in 2024, when 64 participants across nine jurisdictions completed 58 use cases and settled nearly €1.6B in central bank money. Those trials helped shape Pontes and the longer-term Appia project, which is studying whether Europe should use one shared ledger or several interoperable systems.
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