ECB speech on digitalisation of money and payments

Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), delivered a speech at the Istituto Affari Internazionali on the impact of digitalisation on money and payments.

He emphasized that central banks’ core mandate to issue money and safeguard its value remains unchanged, but the technological environment has evolved significantly. Digital payments are increasing, and new technologies like tokenisation and distributed ledger technology (DLT) are transforming financial markets and payment systems.

The ECB highlights three main challenges in the euro area:

• Absence of a European digital means of payment that works seamlessly across the euro area.
• Potential disruption in wholesale markets if central bank money does not adapt to tokenisation.
• Cross-border payments remain slow, costly, and opaque, risking further fragmentation.

The ECB’s comprehensive payment strategy includes three pillars:

1. Preparing to issue a digital euro as a digital cash equivalent for retail transactions.
2. Enabling settlement of DLT-based transactions in central bank money from September 2023.
3. Interlinking fast payment systems to improve cross-border transactions.

The digital euro aims to complement cash, not replace it, supporting online and offline use, with legal tender status and common standards for acceptance across Europe. A pilot is expected to start mid-2027, with potential issuance in 2029.

Regarding wholesale transactions, tokenisation promises faster, more efficient transfer and settlement of financial assets. The ECB is working on connecting market DLT platforms to TARGET services, with the Pontes project available from the third quarter of 2023, and aims to develop a comprehensive blueprint by 2028.

For cross-border payments, the ECB supports interlinking fast payment systems internationally to reduce frictions, ensuring payments are seamless without compromising monetary sovereignty. The existing infrastructure, such as TIPS, is being expanded to include other currencies and regions.

In conclusion, the ECB aims to preserve trust and stability across all payment domains by modernising central bank money and supporting private sector innovation, ensuring the financial system remains resilient amid technological change.