ECB Highlights Need for Central Bank-Backed Stablecoins to Expand

The European Central Bank (ECB) has renewed its efforts to promote the use of central bank digital money as part of Europe’s broader initiative to build a more extensive digital financial market. In this context, Piero Cipollone, Executive Board Member, stated that tokenized deposits and stablecoins will require a general settlement infrastructure backed by central bank money to ensure market growth across the region.

Cipollone outlined this vision during a speech in Brussels on March 23, emphasizing that central bank digital money serves as a fundamental pillar for settling securities, deposits, and stablecoins. He warned that, without such a mechanism, market participants might receive payments in assets they are reluctant to hold due to price volatility or credit risk, limiting the market’s expansion.

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ECB’s “Pontes” Project to Strengthen Digital Transaction Settlement

As part of this initiative, the ECB places public money at the core of its digital strategy through the “Pontes” project, which leverages distributed ledger technology (DLT) for transaction settlement within the European System of Central Banks. The project aims to link DLT-based market platforms with TARGET services, enabling transactions to settle directly in central bank money.

“Pontes” is scheduled for an initial launch in Q3 2026 to meet immediate market demand and allow participants to execute and settle digital transactions more efficiently.

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Dual-Track European Plan: From “Pontes” to “Appia”

“Pontes” represents the short-term track of a broader dual-track plan, focusing on practical settlement tools. The long-term track, “Appia,” aims to create a fully integrated European digital financial system by 2028. The ECB noted that Appia will be developed in collaboration with market participants to outline the evolution of digital finance while maintaining central bank money as a foundation of trust and stability.

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ECB Calls for Legal Framework Supporting Digital Assets

Cipollone emphasized that settlement infrastructure alone is insufficient, advocating for stronger collaboration between public institutions and private companies, alongside legal frameworks compatible with tokenized finance. Appia also focuses on interoperability, enabling digital assets to move across different DLT platforms using standardized data formats and compatible smart contracts.

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ECB Warns of Regulatory Gaps

The Executive Board member praised the European Commission’s plan to expand its DLT pilot program, calling it an important step. However, he cautioned that Europe may still need a dedicated legal framework to facilitate the issuance, custody, and transfer of digital assets smoothly across the Union.

In parallel, private sector firms have engaged with these initiatives. Notably, Circle, in its feedback submitted on March 20, urged the expansion of the DLT pilot and the allowance for regulated digital asset service providers to offer digital cash account services.

These positions, together with statements from the ECB, reflect a shared public-private commitment to establishing clearer rules, supporting the development of scalable digital financial markets across Europe.