Speaking at the Jackson Hole Economic Policy Symposium on August 28, Schnabel said central banks need to extend their operational reach into tokenised markets rather than leave settlement dependent on private forms of money. Her remarks went beyond simply connecting existing payment systems to blockchain-style networks, setting out a case for central bank money itself to operate within programmable digital infrastructure.
Schnabel said smart contracts could allow central banks to create new liquidity facilities and alter interest rates, collateral requirements and access conditions with immediate effect. She argued that such capabilities would become increasingly important if tokenised markets accelerate the speed at which liquidity pressures spread through the financial system.
The ECB official stopped short of proposing that all central bank money be transferred immediately to a public blockchain. Her argument centred on wholesale finance and distributed ledger technology, or DLT, where tokenised securities, bank reserves and settlement assets can interact on programmable platforms. The architecture could involve a single ledger or interoperable systems, provided central bank money remains the ultimate risk-free settlement asset.
Schnabel said putting reserves and collateral in the same programmable environment could allow transactions such as repurchase agreements to settle atomically, meaning the transfer of securities and money would occur together. Smart contracts could also automate collateral calls, substitutions and differentiated remuneration, reducing the need for separate messaging and reconciliation.
Her case drew on Project Pine, a joint research initiative of the New York Innovation Center at the Federal Reserve Bank of New York and the Bank for International Settlements Innovation Hub. The project built and tested a prototype toolkit using smart contracts for functions including paying interest on reserves, exchanging reserves for collateral, conducting asset swaps and executing purchases and sales.
Project Pine found that programmable contracts could allow central banks to adjust or create policy tools quickly in hypothetical tokenised markets. The BIS has stressed, however, that the work was experimental and that technical development remains at an early stage, making it evidence of feasibility rather than a ready-made operating model.
The ECB is already moving towards tokenised wholesale settlement through Project Pontes, which is designed to connect the Eurosystem’s TARGET Services with market DLT platforms and provide an ECB-operated platform for settling DLT-based transactions in central bank money. The service is due to begin in September, although the first phase will still anchor legal settlement finality for the cash leg in TARGET2.
Smart-contract functionality is expected to be added to the Eurosystem DLT platform after the initial Pontes launch, alongside plans for round-the-clock operations. The longer-term Project Appia is examining the architecture, governance and market framework for a broader tokenised financial ecosystem in Europe.
Schnabel’s intervention comes as central banks assess how the spread of tokenised deposits, stablecoins and digital securities could alter the role of public money. She warned that if tokenised finance develops without central bank money at its core, private settlement assets could gain greater importance and weaken the monetary system’s public anchor.
The issue is distinct from the ECB’s digital euro project, which is aimed primarily at providing a digital form of central bank money for retail payments. Pontes and Appia focus on wholesale financial markets, where banks and other institutions settle large-value transactions and securities trades.
Schnabel also highlighted risks created by programmability itself. Automated margin calls triggered by market prices could force rapid asset sales, while more frequent payments may raise banks’ intraday demand for reserves. Those dynamics, she said, could require central banks to supply liquidity more quickly than existing operational frameworks allow.
