ECB official calls for central banks to bring reserves on-chain

ECB Executive Board member Isabel Schnabel said central banks should move their money onto distributed ledgers as tokenization reshapes financial markets, arguing that central bank reserves remain superior to stablecoins as the ultimate settlement asset. At the Jackson Hole Economic Policy Symposium, Schnabel said tokenization could make financial transactions faster, safer and more programmable by allowing assets and money to exist on programmable platforms. She highlighted atomic settlement, which can eliminate settlement risk, and programmability, which can automate processes such as collateral substitution, margin management and repo settlement. The potential gains are particularly significant for Europe, she said, because tokenization could help overcome the fragmentation of the euro area’s financial infrastructure. A common digital environment could reduce the operational costs of cross-border transactions, broaden access to financial markets and improve the mobility of collateral. But Schnabel rejected the idea that private stablecoins could replace central bank money at the core of tokenized finance. She said a settlement asset needs to be both safe and elastically supplied...