Piero Cipollone of the ECB discusses Europe’s progress and challenges in developing a digital asset ecosystem, emphasizing the need for a safe settlement anchor, public-private partnership, and a supportive legal framework.
In a keynote speech at the event “Building Europe’s integrated digital asset ecosystem: from vision to implementation,” Piero Cipollone, Member of the ECB Executive Board, highlighted Europe’s advancements in tokenised capital markets.
Since 2021, European issuers have placed nearly €4 billion in fixed-income instruments based on distributed ledger technology (DLT), including the first digital sovereign debt issuances by EU Member States. The Eurosystem’s 2024 exploratory work involved transactions worth approximately €1.6 billion across nine jurisdictions, including real settlements in central bank money.
Tokenisation involves issuing or representing assets as digital tokens on DLT networks, enabling the full transaction lifecycle within a single digital environment, with automation possible through smart contracts.
Europe has established a regulatory framework with the Markets in Crypto-Assets Regulation (MiCA) and the DLT Pilot Regime, positioning it as a leader in tokenised assets. However, two main obstacles hinder scaling: platform fragmentation and the lack of a common, trusted on-chain settlement asset.
To address these, the Eurosystem is developing Pontes, a settlement platform launching in Q3 2023, which will enable settlement in central bank money across DLT platforms. The Appia roadmap, published on March 11, 2023, aims to create a blueprint for a future-ready European digital asset ecosystem by 2028, focusing on standards, interoperability, collateral management, cross-border connectivity, and legal frameworks.
Both Pontes and Appia are integrated initiatives. The design of Pontes will be influenced by Appia’s long-term vision, with operational lessons from Pontes informing Appia’s architecture.
A second key condition is a strong public-private partnership. The Eurosystem’s role is to ensure the availability of a trusted settlement asset, while market participants develop the infrastructure, liquidity, and business models needed for tokenised markets. The Eurosystem’s 2024 public-private exercise involved 64 industry participants testing interoperability and demand for programmability, shaping the design of Pontes.
Appia emphasizes collaboration with market stakeholders, including standards development for asset interoperability. The roadmap invites industry contributions and public consultation to ensure inclusive development and market confidence.
The third condition is a legal framework aligned with technological ambitions. Distributed ledger technology cannot harmonize national laws or securities regulations across the EU. Legislative work is essential to reduce post-trade fragmentation and enable seamless issuance, transfer, and holding of tokenised assets.
The Appia roadmap includes assessing legal gaps and promoting harmonization efforts. The European Commission’s proposals to extend the DLT Pilot Regime and corporate law regimes are steps forward, but a dedicated EU legal framework may be necessary for full integration.
In conclusion, Europe is making significant progress in tokenised finance, with market activity, regulation, and central bank initiatives advancing. Overcoming obstacles requires collective effort from market participants and legislators. Europe has the capacity to build a single digital financial market alongside its single currency.
The foundations are in place; the opportunity must now be seized.
