Central bank money must anchor tokenised finance, Schnabel says
Wholesale tokenisation requires central bank money rather than stablecoins to provide safe settlement assets and elastic liquidity, ECB Executive Board member Isabel Schnabel said at the Jackson Hole Symposium.
Liquidity anchor on programmable ledgers
Isabel Schnabel highlighted that tokenisation in wholesale finance represents a transformative use case for distributed ledger technology by enabling assets and money to interact on programmable platforms.
Discussing Darrell Duffie’s paper at the Jackson Hole Economic Policy Symposium, Schnabel argued that private stablecoins cannot substitute for central bank money as safe settlement assets.
The primary differentiator remains the central bank’s unique capacity to provide liquidity elastically during periods of financial stress.
Euro area authorities are actively testing solutions to anchor wholesale tokenised financial transactions directly in central bank reserves.
Overcoming fragmentation across the euro area
The integration of wholesale financial markets across the euro area depends on establishing unified settlement rails.
According to Schnabel, tokenised finance has struggled to gain traction precisely because markets lack a universally trusted settlement medium.
By enabling securities and cash legs to settle synchronously on shared infrastructures, central banks can eliminate counterparty credit risk and reduce structural fragmentation across European capital markets.
The sovereign backstop remains indispensable
Central banks are right to assert primacy over private stablecoin issuers in wholesale settlement.
Without an elastic sovereign liquidity backstop, private tokens would inevitably fragment liquidity and amplify systemic run risks during stress episodes.
Technical innovation on distributed ledgers cannot replace institutional trust.
Source: Central banks on-chain
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