Piero Cipollone of the ECB discusses how tokenisation and digital assets can improve payments and finance, and the central bank’s role in ensuring efficiency, stability, and sovereignty.
Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), delivered a speech at a workshop on digital assets and monetary policy transmission organized by the ECB, Banca d’Italia, the Euro Area Business Cycle Network, and the Centre for Economic Policy Research.
He highlighted that digitalisation and tokenisation are transforming payments and finance, offering potential improvements in financial services and cost reductions, with important implications for central banks.
Cipollone explained that tokenisation and distributed ledger technology (DLT) are a form of general-purpose technology capable of reframing the entire financial system. By representing assets as digital tokens on DLT networks, they enable the full transaction cycle—issuance, trading, settlement, and custody—to occur within a 24/7 digital environment, potentially simplifying access to finance and reducing costs.
He emphasized that the benefits of tokenisation depend on the simultaneous adoption of the technology across market components, which presents a coordination challenge. Different architectures for DLT ecosystems, such as single shared networks or multiple interconnected networks, involve trade-offs related to fragmentation, liquidity, and competition. Standardization and equal access are crucial to avoid barriers and ensure broad benefits.
The ECB’s role includes issuing tokenised central bank money and making assets eligible as collateral to support market liquidity and scalability. The ECB plans to offer tokenised central bank money settlement for DLT-based transactions through the Pontes project starting September 2026. Additionally, assets issued via DLT are being accepted for Eurosystem credit operations, with efforts to expand eligibility.
The central bank also aims to act as a market catalyst by developing a vision for an integrated, interoperable tokenised ecosystem, exemplified by the Appia roadmap published in March.
Cipollone discussed the implications for monetary policy, financial stability, and monetary sovereignty. He noted that stablecoins and tokenised deposits could underpin a well-functioning market but also pose risks if they replace central bank money. Without tokenised central bank money, markets may face fragmentation, higher costs, and reduced effectiveness of monetary policy transmission.
He warned that reliance on private settlement assets like stablecoins could threaten financial stability through run risks and could weaken monetary sovereignty if foreign-denominated digital assets are widely adopted for domestic payments, risking currency substitution.
In conclusion, tokenisation offers efficiency gains but requires central bank-backed digital assets to maintain stability, policy effectiveness, and sovereignty. The ECB aims to balance innovation with the preservation of fundamental monetary principles in the evolving digital landscape.
Thank you for your attention.
