Lagarde: Europe's money must transition to digital future

Lagarde highlighted the fragmentation of Europe's wholesale markets, where 32 central securities depositories maintain separate records, leading to high transaction costs and home bias.

Tokenization offers a solution by enabling ownership to be recorded once on a shared ledger, with payment and securities changing hands simultaneously.

The Eurosystem aims to build a new, unified layer for these markets from the start.

However, the technology alone is insufficient; a credible, risk-free asset for settlement is crucial.

Industry participants have indicated they will not issue digital assets at scale without the ability to settle in central bank money.

The Eurosystem is responding with projects like Pontes, which will settle tokenized transactions in central bank money this year, and Appia, which is developing a blueprint for a single European market in tokenized finance, positioning Europe at the frontier of this new technology.

Lagarde outlined the strategy for retail payments, emphasizing the digital euro's role in preserving the connection to public money as daily life moves online.

The digital euro, issued by the ECB, will be available to all and aims to end Europe's dependence on international card schemes, which dominate over 60% of card payments.

Many euro area countries lack national schemes, hindering pan-European competition.

Its legal tender status ensures acceptance everywhere, providing a unified payment instrument across the Union.

Open technical standards will enable any provider to build upon it, fostering competition among European players.