ECB Considers Three Models for Tokenizing Central Bank Money Onchain

The European Central Bank is assessing three possible models for bringing central bank money onto distributed ledger technology (DLT), according to Executive Board member Isabel Schnabel.

Speaking at the Bank of England’s Future of Money conference in London, Schnabel outlined the three approaches the ECB is examining as it considers how central bank money could operate within tokenized financial markets.

Three Approaches to Putting Central Bank Money on DLT

The first model would involve the ECB issuing central bank reserves directly through a programmable platform, allowing the money to operate natively on DLT infrastructure.

Under the second approach, the ECB’s existing real-time gross settlement system would remain the foundation for settlement. An interoperability layer would connect the traditional system with DLT networks, while the reserves themselves would remain offchain. The two systems would be linked through a hash-based mechanism.

The third model would involve tokenizing reserves held with the central bank and issuing settlement tokens fully backed by those reserves. Unlike central bank-issued money, however, these tokens would represent private claims, according to Schnabel’s presentation.

ECB Seeks to Preserve the Two-Tier Banking Model

Schnabel also explained how an onchain monetary system could maintain the two-tier structure of today’s financial system.

Under this model, central bank money would continue to serve as the foundation for settlement, while commercial banks would retain their role in providing money and financial services to customers.

This architecture would allow central bank money to operate on DLT infrastructure alongside tokenized financial assets, including securities and deposits, as well as stablecoins.

Tokenization Gains Momentum Across Financial Markets

The ECB’s work comes as financial institutions increasingly explore tokenization as a way to modernize financial market infrastructure.

A Lloyds survey found that 71% of senior executives at the UK’s largest financial institutions expect tokenization to transform financial services. Faster payments and settlement ranked as the most significant potential benefit, cited by 60% of respondents, followed by collateral and liquidity management at 41%.

Meanwhile, 77% of respondents identified investment in emerging technologies as a growth priority, up from 41% in 2025.

Rob Hale, Lloyds’ co-head of global markets, said the main opportunity lies in making financial markets faster, more efficient and more flexible, pointing to quicker settlement, improved collateral utilization and more efficient liquidity flows.

Tokenized Money Could Enable Atomic Settlement

Schnabel highlighted the potential for tokenization to make financial transactions more programmable and atomic, allowing an asset and its corresponding payment to change hands simultaneously.

DLT-based infrastructure could also enable money and financial assets to interact directly across the same network or through interconnected networks, potentially reducing friction between settlement systems.

ECB Advances Pontes and Appia Projects

The ECB has already begun developing infrastructure aligned with this vision.

Its Pontes project, launched last month, is designed to provide tokenized central bank money for transactions conducted on DLT-based platforms.

At the same time, the Appia project is exploring different technological structures for tokenized financial markets. Its work includes examining unified ledgers, interconnected networks and multiple shared-ledger models.

What the ECB’s Onchain Money Models Could Mean

The ECB’s three approaches show that bringing central bank money onchain is not simply a question of tokenizing existing reserves. The choice of infrastructure will determine how central bank money interacts with commercial banks, stablecoins and tokenized assets while preserving the existing monetary hierarchy. As tokenized markets expand, the ability to connect settlement money directly with financial assets could become an important factor in reducing settlement friction and improving liquidity, while the ECB’s approach will also shape how closely Europe’s future financial infrastructure integrates traditional and DLT-based systems.