Piero Cipollone of the ECB discusses how tokenisation and distributed ledger technology can revolutionize finance, the conditions needed for success, and the central bank’s role in enabling this transformation.
Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), delivered a keynote address at the 24th Annual Symposium hosted by Harvard Law School. The discussion focused on the role of technology in the future of finance, particularly tokenisation and distributed ledger technology (DLT).
He emphasized that financial innovation should enhance economic efficiency by helping capital find its most productive use and risk find its best owner at the lowest cost. Despite technological advances since the late 19th century, the cost of connecting borrowers and savers has remained roughly constant at around 2% of intermediated assets in the US and similar in Europe.
Cipollone argued that tokenisation, as a general-purpose technology, has the potential to be transformative by allowing the entire transaction lifecycle—issuance, trading, settlement, and custody—to occur within a single digital environment, available 24/7, and providing a shared source of truth. This could simplify access to finance, reduce costs, and automate processes through smart contracts.
He highlighted that the benefits of such innovation depend on the simultaneous adoption of complementary components within the financial system, similar to historical technological shifts like electricity. The interconnected nature of components such as secondary markets, repo markets, derivatives, legal frameworks, and liquidity infrastructure creates a coordination challenge, which can slow down progress.
To address this, Cipollone discussed the importance of standardization and market architecture. He noted that the choice of system configuration—single shared network versus multiple interconnected networks—will influence market integration and liquidity. Ensuring equal and non-discriminatory access to networks is crucial for reducing barriers and increasing competition.
The role of the central bank is vital in this transition. Cipollone outlined two key contributions: issuing tokenised central bank money to provide a risk-free settlement asset and making tokenised assets eligible as collateral in monetary policy operations. The Eurosystem’s recent trials and the upcoming Pontes project aim to facilitate secure, scalable, and sovereign digital markets.
Additionally, the central bank acts as a catalyst by promoting standards and a shared infrastructure. The ECB’s Appia roadmap, set to deliver a blueprint by 2028, will guide the development of a European tokenised financial ecosystem, addressing standards, interoperability, legal, and regulatory issues. This coordinated approach aims to create an infrastructure that distributes economic gains broadly and supports a competitive, integrated market.
In conclusion, Cipollone stressed that tokenisation and DLT could deliver unprecedented efficiency gains. The pace and structure of adoption depend on policy and institutional choices, which will determine whether these innovations truly reduce finance costs and foster a more integrated financial system.
Thank you.
