ECB's Schnabel urges central banks to 'go on-chain' to stay relevant

At the annual Jackson Hole Economic Policy Symposium, European Central Bank (ECB) board member Isabel Schnabel argued that central banks must embrace blockchain technology to maintain their central role in the evolving financial system. She stated that to fully benefit from the shift towards digital ledgers, institutions like the ECB need to "go on-chain" as well.

Schnabel explained that this means integrating central bank money into the tokenised environment and modernising the tools used for policy implementation. This approach, she argued, would help preserve the relevance of central bank money against private alternatives such as stablecoins, which are increasingly used for settling transactions.

The ECB board member highlighted that programmable transactions on blockchain networks could make central banks more agile in providing liquidity. For instance, they could potentially apply differentiated interest rates or automate collateral requirements in response to market strains.

To achieve this, Schnabel suggested the possibility of a single European ledger where central bank money, private money, and financial assets could be settled together. She cited South Korea's Project Hangang as an example of this approach. Alternatively, she noted that multiple ledgers could be linked to communicate and process transactions across different platforms.

The ECB is already taking steps in this direction. Its Pontes initiative is designed to connect distributed-ledger platforms with existing payment infrastructure. A separate project, named Appia, is exploring the long-term architecture, standards, and legal framework needed to support a European market for tokenised assets.