By This Hour Finance Desk
Isabel Schnabel has set out a forceful case for central banks to move their own money onto distributed-ledger infrastructure rather than merely connect conventional payment systems to tokenised markets. In a speech dated 28 August 2026, the European Central Bank Executive Board member framed the question as one of financial-market architecture: whether central bank money will remain the foundation of wholesale settlement as assets, collateral and trading processes become programmable.
The stakes extend beyond a technical choice about ledgers. Schnabel’s argument is that tokenisation could make parts of wholesale finance faster, more integrated and less operationally cumbersome, particularly where transactions cross borders or time zones. But those gains, in her account, depend on the settlement asset being both safe and capable of expanding when demand for liquidity rises. She contends that central bank reserves, rather than stablecoins, meet that test.
The speech, delivered at the Jackson Hole Economic Policy Symposium on financial innovation, payments and policy, places the ECB’s work in a broader debate about how public money should function in a financial system where securities and cash may be represented as digital tokens. It does not announce a specific ECB implementation decision. Instead, it argues for a direction of travel: central banks should participate directly in programmable financial infrastructure.
Tokenisation’s appeal lies in settlement and automation
Schnabel described tokenisation as a potentially important use of distributed-ledger technology in wholesale finance. In that setting, financial assets and money can be represented as digital tokens on programmable platforms. Her case rests on two connected capabilities: transactions can settle together, or not at all, and rules attached to a transaction can be carried out automatically.
The first capability addresses settlement risk. If the cash and securities sides of a transaction are completed simultaneously, one party is not left exposed after delivering its own side while waiting for the other. The second allows the conditions around a transaction to be executed through programmed rules rather than through a succession of messages, reconciliations and manual interventions across firms and infrastructures.
She did not suggest that these features are wholly new to existing market systems. The Eurosystem’s TARGET2-Securities platform already enables delivery-versus-payment in domestic securities transactions, meaning the security and cash legs can settle together. It also has automated features, including a mechanism that can generate a repo transaction against eligible collateral for intraday credit when a participant lacks enough cash to settle a purchase.
The distinction, in Schnabel’s account, is scope. Tokenisation could make programmability more general across a financial instrument’s lifecycle, while allowing market participants to set relevant conditions. Repo markets illustrate the potential. A repo involves the initial exchange of cash and collateral, but also may involve collateral substitution, margin processes and the eventual return of collateral. On a programmable platform, those steps could be more extensively automated.
Such an arrangement could reduce the operational burden created when multiple institutions and infrastructures exchange information and reconcile records. Schnabel linked that architectural change to faster and safer settlement. She also argued that the possible gains may be more pronounced in cross-border activity and across time zones, where collateral is often positioned in advance and financing arrangements can be operationally demanding.
A possible answer to Europe’s fragmented market plumbing
The speech places tokenisation within a specifically European concern: the persistence of national fragmentation in financial infrastructure. Schnabel said that this fragmentation creates frictions that constrain scale, competition and cross-border capital flows. Accessing sovereign-bond markets across the euro area can require participants to work through multiple central securities depositories, increasing complexity and favoring institutions large enough to absorb the associated costs.
Tokenisation, she argued, could support an ecosystem designed to operate in a more integrated way from the outset instead of relying on links assembled between separate national systems. That position aligns the technology debate with the wider objectives associated with a European savings and investments union.
Her account also reaches beyond the infrastructure used by the largest financial institutions. Tokenisation could lower entry barriers for market-infrastructure providers and for firms seeking access to capital markets, she said. It could also enable fractional ownership of assets that might otherwise require large minimum investments or be difficult to divide. Those are possibilities presented in the speech, not estimates of adoption, cost savings or market growth.
There is an important qualification in Schnabel’s argument. Tokenisation by itself does not resolve institutional questions about trust, money or settlement finality. It changes the technology through which assets and money are transferred. It does not, she said, remove the need for an arrangement that maintains convertibility at par and supports monetary stability. The choice of settlement asset therefore remains central.
Why Schnabel sees stablecoins as a complement, not a replacement
Schnabel’s strongest conclusion concerns stablecoins. She argued that well-designed stablecoins cannot substitute for central bank money as the ultimate settlement asset for wholesale financial markets, although they may complement it in payments and digital economic activity if appropriately designed and regulated.
Her reasoning begins with the modern two-tier monetary system. Central banks issue the ultimate settlement asset used in wholesale transactions, while commercial banks issue money-like claims that generally circulate at par. In her description, this structure developed in response to longstanding coordination, trust and stability problems associated with private money.
A settlement asset, she argued, needs two qualities. It should be safe, without credit, liquidity or redemption risk. It also needs an elastic supply, able to increase in response to a rise in liquidity demand. A stablecoin backed by suitable government securities could potentially be structured to reduce credit and duration risk, she said. But its issuer would not have an independent capacity to increase liquidity in a period of market stress or abrupt shifts in confidence.
That distinction matters because liquidity strains are not only a question of the quality of assets already backing a private token. They concern the ability of the system to respond when users seek money-like assets at the same time. Schnabel’s argument is that central banks uniquely possess that capacity and can provide liquidity to stabilize the monetary system when needed. In her formulation, this capacity supports the credibility that different commercial-bank deposits can be exchanged at par.
The speech uses earlier periods of private and constrained money issuance as historical context. It refers to the United States’ free-banking era, when notes issued by state-chartered banks could trade at discounts depending on the issuing bank’s perceived reliability and distance. It also points to the inflexibility of currency supply under the later National Banking System, when the supply was tied to holdings of eligible government bonds and could not readily accommodate surging demand for cash.
Those comparisons are part of Schnabel’s policy argument, rather than evidence that present-day stablecoin arrangements will produce identical outcomes. Her conclusion is nevertheless clear: private tokens may add payment choices, but should not displace central bank reserves at the point where financial markets require a risk-free asset with an elastic supply.
Three routes, and a trade-off over control and resilience
Schnabel identified three broad ways central bank money could be used with programmable platforms. The first is to issue tokenised reserves directly on a programmable ledger. The second is to connect today’s payment systems to programmable platforms through bridges or synchronisation arrangements. The third is to have a private intermediary tokenise reserves through an omnibus account.
Only the first model makes central bank reserves native tokenised assets, she said. In the bridging model, reserves remain outside the tokenised environment even if systems communicate with one another. In the omnibus-account model, the tokenisation function is delegated to a private institution. Schnabel treated the alternatives as a choice over the extent to which central banks take part in the next generation of market infrastructure rather than simply support it from outside.
Her preference is for central banks to embrace distributed-ledger technology and go on-chain. She argued that native tokenised reserves could preserve central bank money’s role in settlement while making use of programmability in monetary-policy implementation, collateral management and liquidity provision. She also linked that prospect to financial stability.
Yet the speech does not present a single-ledger design as costless or inevitable. Schnabel described a trade-off between integration and other public-policy concerns. A unified system, whether one ledger or a small number of large ledgers, could reduce interoperability problems and fragmentation. It could also raise questions about resilience, innovation and governance. The alternative of a central bank-operated ledger linked to other platforms sits within the same unresolved design debate.
The report is based on the supplied account of an ECB speech and has not been independently corroborated. The available material supports Schnabel’s stated policy view and the three implementation options she discussed, but it does not establish whether the ECB will adopt any particular model, on what timetable, or with what legal and operational framework. It also does not provide a market reaction, an implementation cost, or a forecast for tokenised-finance adoption.
For banks, market-infrastructure operators and policymakers, the significance of the speech lies less in an immediate operational change than in the position it takes. Schnabel is arguing that settlement in tokenised wholesale markets should be built around public money that is itself programmable, rather than around private substitutes or connections that leave reserves outside the ledger environment. Whether that view becomes ECB policy will depend on decisions not contained in the supplied material.
