Isabel Schnabel, a member of the ECB's executive committee, has argued in Jackson Hole that central banks should adopt distributed ledger technology and issue money on the blockchain to modernise the financial system.
The integration of distributed ledger technology (DLT) in wholesale finance is one of the most promising applications for representing financial assets and money as tokens on programmable platforms. This was stated by Isabel Schnabel, a member of the executive committee of the European Central Bank (ECB), at the Jackson Hole symposium held on August 28, as reported by the publication ecb.europa.eu.
Schnabel noted that while tokenisation offers benefits such as atomicity and programmability, its take-off has been hindered by the lack of a safe settlement asset. In her speech, she concluded that stablecoins are dominated by central bank money-based solutions, due to the unique ability of central banks to provide liquidity elastically.
The ECB official has advocated for central banks to adopt DLT and move their money to the blockchain. This would preserve their role as the basis for settlement and also leverage the programmability of distributed ledgers to modernise the implementation of monetary policy, collateral management, and liquidity provision, thus fostering financial stability.
Regarding the implementation method, Schnabel raised a dilemma: to integrate central bank reserves with tokenised assets in one or several shared ledgers, or to issue them in a ledger operated by the central bank that connects with other platforms. The choice will depend on the balance between a unified infrastructure that reduces fragmentation and the challenges for resilience, innovation, and governance.
Tokenisation offers two closely related benefits for wholesale finance: atomicity and programmability. Atomicity means that the legs of a transaction settle together or not at all, eliminating settlement risk. Programmability means that settlement can be conditional on a set of rules that execute automatically.
In the eurozone, tokenisation could encourage integration by allowing assets and settlement to operate on common infrastructures. Examples such as the French Lightning Stock Exchange (Lise) show how tokenisation can reduce the costs of operating small-cap public markets, benefiting smaller companies.
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