Digital assets, payment efficiency and monetary policy

Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), delivered a speech at a workshop on digital assets and monetary policy transmission organized by the ECB, Banca d’Italia, the Euro Area Business Cycle Network, and the Centre for Economic Policy Research.

He highlighted that digitalisation and tokenisation are transforming payments and finance, offering potential to improve financial services and reduce costs. Central banks need to consider these innovations’ implications for monetary policy, financial stability, and sovereignty.

Cipollone explained that tokenisation and distributed ledger technology (DLT) could be transformative as general-purpose technologies, enabling the full transaction lifecycle within a 24/7 digital environment. This could simplify access to finance and enhance financial services.

He emphasized the importance of market-wide adoption for efficiency gains, noting the coordination challenges and the need for compatible architectures and standards to avoid fragmentation and promote competition.

The ECB’s role includes issuing tokenised central bank money and accepting DLT-issued assets as collateral to support liquidity and market expansion. The Eurosystem plans to offer tokenised central bank money settlement for DLT transactions through the Pontes project starting September 2026.

Furthermore, Cipollone discussed the ECB’s efforts to develop a coherent ecosystem, including the Appia roadmap, to prevent fragmentation and support innovation.

He addressed the implications for monetary policy, financial stability, and monetary sovereignty, warning that reliance solely on private settlement assets like stablecoins could undermine policy transmission, increase run risks, and threaten currency sovereignty.

He concluded that central banks must balance supporting innovation with safeguarding the principles of the monetary system, emphasizing the Eurosystem’s approach to preserving the balance between public and private money in the evolving digital landscape.

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