Isabel Schnabel, a member of the European Central Bank's Executive Board, calls for central banks to move their funds on-chain as financial markets grow more tokenized. In her August 28 Jackson Hole address, Schnabel stated that central bank reserves must be programmable assets on distributed ledgers. She claims that this might speed up the settlement of tokenized assets, make monetary policy more flexible, and enhance central banks' capacity to provide liquidity in times of market stress.

Schnabel’s Push to Put Central Bank Money On-Chain

Schnabel's key point is simple, i.e., central bank funds shouldn't stay outside of blockchain-based platforms if financial assets are shifting to them.

She maintained that in order to "go on-chain," central banks ought to make their reserves directly accessible on distributed ledger technology (DLT) platforms. This will enable tokenized financial assets and central bank money to operate in the same programmable environment.

A major benefit would be programmability. Central banks might employ smart contracts to more swiftly modify specific monetary-policy operations, collateral requirements, and liquidity circumstances rather than depending on separate systems and human procedures.

Atomic settlement was also emphasized by Schnabel. The asset being exchanged and the money used to purchase it may settle as a single transaction if they are both on the same DLT platform. This may lessen the need for independent messaging, system coordination, and reconciliation.

Tokenisation can foster European integration and enhance monetary policy implementation, says Executive Board member @Isabel_Schnabel. To unlock its full potential, central banks should bring reserves on-chain, as envisaged under Projects Pontes and Appia https://t.co/I04bEXuELT pic.twitter.com/vm64Tyd8fa

— European Central Bank (@ecb) August 28, 2026

Why Schnabel Says Stablecoins Cannot Replace Central Bank Money

The stablecoin market has risen to almost $310 billion at the time of the argument. However, Schnabel does not believe that central bank reserves will be replaced by private stablecoins.

What happens when financial markets are under strain is her main focus.

When the demand for liquidity spikes, central banks can raise the amount of reserves they have. During a financial shock, private stablecoin issuers are less able to offer liquidity in an elastic manner.

According to Schnabel, this makes central bank funds a more secure basis for settlement. Central bank reserves can continue to be the final settlement asset since they are not subject to the same credit and liquidity issues as private issuers.

As a result, she views stablecoins as supplements to central bank currency rather than as alternatives. The primary settlement asset in a tokenized financial system should continue to be a direct claim on the central bank, while private digital tokens may still play a part.

Project Pontes Brings ECB Closer to On-Chain Settlement

Through Project Pontes, the ECB is already pursuing this concept.

Pontes is intended to link market-run DLT platforms with the Eurosystem's current TARGET Services. Launching in Q3 2026, the project will first use synchronization between DLT platforms and conventional settlement infrastructure.

However, Pontes is meant to do more than just link two systems. To settle DLT-based transactions in central bank money, the ECB intends to run its own DLT platform.

The platform is expected to eventually allow 24/7 operations and smart contracts. Instead of just linking blockchain platforms to the current TARGET system, this would enable the ECB to include native tokenization and programmability into its own settlement infrastructure.

Project Appia Looks Toward a Tokenized Financial System

Pontes concentrates on implementing these concepts, whereas Project Appia considers the wider picture.

The project is investigating several approaches to developing a tokenized financial ecosystem in Europe. One choice is a single common European ledger that holds financial assets, money from commercial banks, and money from central banks. An ECB-run ledger linked to private DLT networks is another. A third strategy would link several different specialized ledgers.

Technology is not the only factor in the decision. Schnabel highlighted trade-offs related to fragmentation, governance, resilience, and interoperability. While several linked ledgers could provide more resilience and space for creativity, a single ledger might facilitate settlement more easily.

Thus, Project Appia is investigating which architecture might facilitate tokenized markets without generating new issues with infrastructure and liquidity.

Pontes and Appia together stand for the ECB's efforts to maintain central bank funds at the core of the developing tokenized financial system in Europe.

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