ECB's Isabel Schnabel Says Tokenization Could Improve Settlement and Liquidity

European Central Bank Executive Board member Isabel Schnabel said tokenization could bring atomic settlement and programmability, helping reduce settlement risks in cross-border repo transactions and integrate fragmented financial infrastructure in the euro area. According to Foresight News, she made the remarks in a Jackson Hole seminar speech titled "Central banks on-chain." She said stablecoins lack elastic liquidity supply and cannot replace central bank reserves as the ultimate settlement asset, especially during periods of stress. Schnabel said they are better viewed as regulated supplementary payment tools rather than substitutes. She added that tokenized bank deposits that settle in central bank money, are programmable, and interoperable with tokenized assets could provide the core functions stablecoins seek. Schnabel argued that central banks should issue tokenized reserves natively on distributed ledgers for monetary policy, collateral management, and liquidity provision. The ECB is advancing Project Appia and the soon-to-launch Project Pontes, which aim to synchronize TARGET services with DLT platforms and eventually enable native tokenization based on central bank money and 24/7 operation.