ECB seeks to issue euros directly on blockchain

The ECB wants to issue euros directly on a blockchain for banks to use in settlement. Executive Board member Isabel Schnabel said stablecoins should complement central bank money rather than replace it. Schnabel said a central bank can create more cash during a panic, but a stablecoin issuer cannot. She linked this concern to the banking panic of 1907 and the Federal Reserve Act of 1913. Dollar-pegged stablecoins circulate about $304 billion, according to DefiLlama data. Euro-pegged tokens hold under $1 billion. If private tokens win settlement, Europe settles in dollars. The Pontes project goes live next month and will link TARGET Services to market blockchain platforms. TARGET2 finality will remain in place initially. Smart contracts and round-the-clock operation will come later. From May to November 2024, 64 institutions across nine jurisdictions tested 58 use cases. The tests settled nearly €1.6 billion in central bank money. Schnabel considered direct token issuance, a bridge from existing systems, and private tokenization of reserves through an omnibus account. She supports direct issuance because the other routes would leave the ECB unable to run repo operations in code. The Appia project is still considering whether Europe needs one shared ledger or several. Schnabel cited France's Lise, which holds Europe's first tokenized exchange license, as evidence that tokenization can open markets to smaller firms.