ECB Official Says Central Banks Need to “Go On-Chain” as Blockchain Reshapes Finance

European Central Bank Executive Board member Isabel Schnabel has urged central banks to embrace blockchain technology, arguing that they need to move “on-chain” to remain at the centre of the rapidly changing financial system.

Speaking at the Jackson Hole Economic Policy Symposium on August 28, Schnabel said central banks should bring central bank money into tokenised financial markets as blockchain and distributed ledger technology become increasingly important in global finance.

Blockchain is increasingly being used to tokenise financial assets, allowing things such as bonds, securities and money to be represented as digital tokens and traded or settled on programmable networks.

Schnabel argued that if financial markets move further toward tokenised infrastructure, central banks cannot afford to remain outside that ecosystem.

Her argument is essentially that central bank money needs to be available wherever major financial transactions are taking place.

One of Schnabel’s biggest concerns is that private digital currencies, particularly stablecoins, could become increasingly important for financial settlement if central banks do not adapt.

She argued that bringing central bank money onto blockchain networks would help ensure that public money remains the trusted foundation of the financial system rather than allowing private alternatives to fill that role.

Blockchain could also give central banks new tools. Programmable transactions could potentially allow monetary policy operations, collateral management and liquidity provision to be automated or adjusted more efficiently.

This isn’t just a theoretical discussion. The ECB is already developing Pontes, a system designed to connect distributed-ledger platforms with the Eurosystem’s existing TARGET payment infrastructure.

The central bank is also working on Appia, a longer-term initiative aimed at creating infrastructure for a more integrated European tokenised financial market. Schnabel believes these efforts could help Europe take advantage of blockchain while ensuring that central bank money remains at the heart of the financial system.