The future of money: a central bank perspective

Piero Cipollone, Member of the Executive Board of the European Central Bank (ECB), presented a perspective on the future of money at a roundtable at Aspen Institute Italia. He emphasized that central banks’ core role of issuing money and maintaining its value remains unchanged, but the technological environment is rapidly evolving.

Digital payments are now standard, and new technologies are disrupting financial services. Central banks must modernize to ensure money remains stable, trusted, and usable in a digital world. Failure to do so could undermine the stability and sovereignty of the financial system.

In the euro area, the ECB and national central banks (the Eurosystem) have played a key role in integrating the euro as a single currency and developing infrastructure such as T2, T2S, TIPS, and ECMS for secure and efficient transactions across the region. The next steps include issuing a digital euro, enabling transactions based on distributed ledger technology (DLT), and interlinking fast payment systems internationally.

The ECB identifies three main challenges:

• Fragmentation of retail payments across Europe, relying heavily on non-European providers.
• The changing nature of money and payments, with tokenization and DLT risking fragmentation and undermining monetary sovereignty without central bank digital currency (CBDC).
• Slow, costly, and opaque cross-border payments, with stablecoins posing risks to financial stability and the euro’s international role.

The ECB’s strategy involves strengthening public-private partnerships, ensuring technology neutrality, and providing a solid public foundation for innovation. This includes the potential issuance of a digital euro, which would be a digital form of cash, available both online and offline, and designed to support resilience, privacy, and the role of banks in financing the economy.

The digital euro aims to be a legal tender accessible across the euro area, supporting consumer choice and reducing costs. It will also enable co-badging with existing solutions and promote pan-European standards.

In wholesale markets, the ECB is exploring tokenized central bank money through projects like Pontes and Appia to facilitate secure settlement of digital assets and create an integrated digital asset ecosystem. For cross-border payments, interlinking TIPS with international fast payment systems and designing the digital euro for international use will make payments faster, cheaper, and more transparent while safeguarding monetary sovereignty.

In conclusion, Europe faces both risks and opportunities from technological disruption. Acting proactively with private sector collaboration can help Europe lead in the transformation of money, ensuring a resilient, innovative, and integrated financial system that supports economic stability and strategic autonomy.