Lagarde: Digital euro and tokenisation to counter fragmentation

Fragmentation has long hindered European wholesale markets, with 32 central securities depositories across the Union compared to just two in the United States, leading to high transaction costs and home bias.

Tokenisation offers a solution by enabling ownership and payment to be recorded on a shared ledger, settling instantly.

ECB President Lagarde noted, "We have been trying for decades to weave our national systems into one.

Now we can build a new layer that is complete from the start.

" The market demands central bank money for settlement to achieve scale, as private tokens lack universal trust and liquidity flexibility.

The Eurosystem is responding with projects like Pontes, settling tokenised transactions in central bank money this year, and Appia, designing a single European market for tokenised finance.

In retail payments, the digital euro aims to preserve the connection to public money as daily life moves online, a role currently filled by cash.

Beyond this, it addresses Europe's long-standing dependence on international card schemes, which account for over 60 percent of card payments.

European schemes have struggled to achieve pan-European scale due to a 'vicious circle' of limited merchant acceptance and customer usage.

The digital euro, with its legal tender status, must be accepted everywhere, fostering competition among European providers through open technical standards and creating a truly unified payment instrument across the Union.