ECB Board Member Schnabel Argues Central Bank Money Must Move Onto Blockchains

Isabel Schnabel, a member of the Executive Board of the European Central Bank (ECB), called for central bank money to be issued and moved on blockchains using smart contracts, in remarks reported from the Jackson Hole symposium. Her argument runs in two parts. First, if securities and funds migrate to distributed ledgers while central bank reserves do not, the settlement asset for those markets becomes a privately issued dollar token. Second, programmable reserves would let a central bank change interest rates, collateral terms and access conditions with immediate effect rather than through the current chain of instructions to commercial banks.

The institutional plumbing is already moving. The ECB's Project Pontes, a bridge between distributed-ledger platforms and the euro area's real-time settlement system, is scheduled to go live on 21 September, with smart-contract functionality and continuous operation slated for later phases.

In monetary terms, this is a question of who holds the final settlement claim. Schnabel's position is that the claim should stay with the central bank rather than be delegated to a private issuer holding Treasury bills. That is the same contest that has recurred in every upgrade to payments technology, as CoinDesk traced in its account of a thousand years of money transmission from hawala to SWIFT: each reduction in friction moves the trust point, and whoever holds the trust point sets the rules.

For crypto, the implication is uncomfortable in both directions. Programmable central bank money would validate the technical thesis behind tokenized settlement, and at the same time it would compete directly with the euro stablecoins that licensing under the European Union's Markets in Crypto-Assets Regulation (MiCA) was supposed to enable.