Contribution by Piero Cipollone, Member of the Government Board of the ECB, to a roundtable at Aspen Institute Italia
Rome, 19 December 2025
Cash is on the coronary heart of what central banks do.[1] Ever since central banks have existed, their core position has been to difficulty cash and shield its worth. That mandate won’t change – however the technological setting during which we ship it’s altering, and it’s altering radically.
Digital funds are actually the norm, and new applied sciences are disrupting monetary providers. Monetary establishments have grow to be technological entities, and tech corporations have entered the spheres of funds and finance.
Central banks are not any exception. If they need cash to stay secure, trusted and usable in a digital world, they need to assist form that world and modernise central financial institution cash. In the event that they fail to take action, central banks might not be capable of present an anchor of stability to the monetary system.
Within the euro space context, there are good causes for the central financial institution to not simply comply with however take the lead within the transformation of cash. As a financial union, we share a single foreign money and a single financial coverage. For that to work, we should make sure the singleness of cash throughout the euro space: one euro should at all times be value one euro, regardless of its type and regardless of the place within the euro space.
The Eurosystem – that’s, the ECB and the nationwide central banks of euro space nations – has performed a key position on this respect. In simply 25 years the euro has grow to be the foreign money of 20 nations (quickly to be 21) and the world’s second most essential foreign money. The Eurosystem points euro banknotes, which have grow to be the tangible image of Europe’s financial unity. And we’ve got constructed strong infrastructures – T2 for large-value funds, T2S for securities, TIPS for fast funds and ECMS for collateral – which permit cash and property to maneuver safely and effectively throughout the euro space.
We now must take the following steps. Immediately, I’ll talk about the challenges we face, how private and non-private cash can complement one another and what this implies for retail, wholesale and cross-border funds. Our technique is three-fold. First, we’re preparing for the potential issuance of a digital equal of money: the digital euro. Second, beginning subsequent 12 months, we are going to make it attainable to settle transactions based mostly on distributed ledger know-how (DLT) in central financial institution cash. And third, we’re engaged on interlinking our quick cost system with these of different nations to boost cross-border funds.
Three issues looking for an answer
However let me begin with the problem we face.
It has typically been instructed that digital central financial institution cash is an answer looking for an issue. However it’s more and more acknowledged, even by those who dispute the answer, that we face an actual difficulty within the euro space context. To paraphrase the title of Pirandello’s well-known play[2], I see three issues looking for an answer.
First, retail funds in Europe are nonetheless fragmented. The Single Euro Funds Space (SEPA) has built-in credit score transfers and direct debits, however we nonetheless lack a European resolution for on a regular basis funds on the level of sale and in ecommerce that works all through the euro space.[3] Because of this, we rely closely on just a few non-European card and pockets suppliers. This dependence places our strategic autonomy in danger.
Second, the character of cash and funds is altering. Tokenisation and DLT promise extra environment friendly capital markets.[4] But with out tokenised central financial institution cash at their core, these new ecosystems would depend on fragmented swimming pools of personal settlement property, reintroducing credit score danger and fragmentation. We’d be extra uncovered to the enlargement of settlement property denominated in foreign currency or issued elsewhere, which might undermine our financial sovereignty. And public cash would not present the anchor of stability into which all non-public property will be transformed.
Third, cross-border funds stay too gradual, too expensive and too opaque. Stablecoins supply another. However stablecoins include a variety of dangers for home currencies and monetary methods.[5] And if dollar-based stablecoins have been to increase and proceed dominating the market, they might erode the worldwide position of the euro.
On this context, doing nothing is just not a sound possibility. If central financial institution cash have been to grow to be marginal in a digital world, we’d danger having a much less resilient cost system, a much less secure monetary system, weaker financial sovereignty and diminished strategic autonomy. European monetary establishments and infrastructures could be at a aggressive drawback, and the euro’s position may diminish.
Constructing on the complementarity of private and non-private cash
Our mandate doesn’t permit us to disregard these dangers. When the foundations of cash and funds are shifting, the central financial institution should evolve as properly. Our purpose is to not crowd out non-public innovation, however to supply a strong public basis on which innovation can flourish safely and at scale.
This requires a renewed public-private partnership throughout all cost dimensions – retail, wholesale and cross-border. Our technique rests on three pillars: the complementarity of private and non-private cash, a collaborative strategy with market individuals and strict know-how neutrality.
Central financial institution cash and personal cash will not be rivals, they complement one another. Central financial institution cash gives the final word settlement asset, freed from credit score and liquidity danger, and the reference that makes one euro equal to 1 euro throughout banks, devices and applied sciences. The convertibility of personal cash into central financial institution cash provides individuals confidence {that a} euro is a euro, no matter type it takes.
This provides non-public intermediaries a strong foundation on which to supply trusted and revolutionary providers. Furthermore, our infrastructures and requirements present frequent rails that the non-public sector can use throughout Europe. This reduces fragmentation, ensures interoperability and lowers prices in a community trade the place scale and customary requirements matter.
We already supply digital central financial institution cash and the related rails for wholesale funds. And the digital euro would lengthen the identical strategy to retail funds, complementing money with its digital equal and providing pan-European rails that non-public European suppliers can use to innovate and scale up their options. However we can’t stand nonetheless in wholesale funds both because the market explores the alternatives related to tokenised securities, DLT-based buying and selling and settlement, and sensible contract automation.[6] For these improvements to be scaled up safely in Europe, central financial institution cash has clear benefits when it comes to security, scalability and liquidity administration in contrast with non-public settlement property constrained by the reserves backing them and market danger. In actual fact, the non-public sector has been clear: the absence of central financial institution cash as a settlement asset is a serious impediment to the expansion of the digital asset ecosystem.
Our strategy is explicitly collaborative. We interact with all stakeholders. We take a look at options with the market somewhat than designing them in isolation. That is what we did in 2024 once we performed probably the most intensive exploratory work on wholesale DLT settlement in central financial institution cash on the earth so far.[7] And we’re following the identical strategy in getting ready for the attainable issuance of the digital euro. As an illustration, we collaborated with market individuals to discover the digital euro’s revolutionary potential.[8] And we are going to launch a pilot train that may supply banks a possibility to realize first-hand expertise in a simulated digital euro ecosystem.[9]
In supporting this digital transformation, we stay know-how impartial. Whereas being open to new applied sciences, we don’t decide winners. As a substitute, we concentrate on setting the situations for a protected, built-in system that’s match for the digital age and helps innovation.
Shaping the way forward for cash
So, in follow, what are we doing to assist form the way forward for cash?
The digital euro
Within the retail area, we’re engaged on the potential issuance of a digital euro. Assuming that European co-legislators undertake the Regulation on the institution of the digital euro in the midst of subsequent 12 months, a pilot train and preliminary transactions may happen as of mid-2027, and the digital euro could possibly be prepared for first issuance in 2029.
The digital euro could be a digital type of money. It might supply a public resolution that’s authorized tender and might thus be used to pay wherever retailers settle for digital funds, all through the euro space, in each bodily and on-line outlets.
The digital euro would lengthen the advantages of bodily money to the digital sphere. At a time when the position of money in day-to-day funds is declining, it might be sure that shoppers at all times have a European choice to pay digitally. This might enhance shoppers’ freedom of alternative and Europe’s strategic autonomy. The digital euro could be accessible each on-line and offline, supporting resilience and privateness. And by avoiding extreme reliance on just a few dominant gamers, it might cut back prices for retailers and finally costs for shoppers.
The digital euro can also be being designed to protect the position of banks in financing the financial system. Banks will distribute the digital euro, keep buyer relationships and handle digital euro accounts or wallets. They are going to be remunerated for these providers. Furthermore, we’ve got included safeguards to protect banks’ position in credit score intermediation and financial transmission:[10] the digital euro won’t bear curiosity, holding limits will stop destabilising outflows and hyperlinks to current financial institution accounts will permit shoppers to seamlessly pay quantities that exceed their digital euro holdings.
For cost service suppliers, together with banks, the digital euro is a chance. A single European normal, backed by authorized tender standing and an unparalleled acceptance community, will make it simpler to scale up European playing cards, wallets and value-added providers. Co-badging current options with the digital euro[11] and constructing on frequent requirements will decrease the price of increasing acceptance and make it simpler for European initiatives to increase throughout the euro space.
Tokenised central financial institution cash
In wholesale funds and capital markets, we goal to make tokenised central financial institution cash accessible to assist an built-in European marketplace for digital property.
Tokenisation can cut back reconciliation, shorten settlement chains, allow atomic delivery-versus-payment and permit near-continuous buying and selling and settlement.[12] However and not using a frequent, risk-free settlement asset, liquidity can splinter, property is probably not traded throughout platforms and the panorama may fragment alongside nationwide or non-public strains.
Tokenisation additionally affords us the chance to design an built-in European marketplace for digital property – in different phrases, a digital capital markets union – from the outset. Offering tokenised central financial institution cash is crucial for this digital asset ecosystem to develop in Europe and never elsewhere. This will even guarantee it’s constructed on European infrastructures, euro settlement and EU-wide guidelines.
To this finish, the ECB is pursuing a dual-track strategy.[13]
Mission Pontes will join market DLT platforms to our current TARGET providers, in order that tokenised asset transactions will be settled in central financial institution cash.[14]
Mission Appia will discover two attainable approaches for an built-in digital asset ecosystem, which may doubtlessly be mixed.[15] First, a European shared ledger that brings collectively central financial institution cash, business financial institution cash and different property on a single platform the place market stakeholders present providers. Second, a European community of interoperable platforms that reduces present frictions available in the market.
Interlinking quick cost methods
In cross-border funds, our goal is openness with autonomy.
Immediately, many cross-border transactions nonetheless cross via lengthy correspondent banking chains, making them gradual, expensive and opaque. One attainable future would see international, dollar-based stablecoins and their platforms dominate cross-border funds, creating dangers of latest dependencies and foreign money substitution.
We wish a special path.
Inside Europe, TIPS already gives prompt settlement in central financial institution cash and is being prolonged throughout currencies. Within the close to future, TIPS may evolve into a worldwide hub for fast cross-border funds. By interlinking TIPS with the quick cost methods of different nations, beginning with India and different companions worldwide, we are able to reduce intermediaries, shorten transaction chains and decrease prices.
The digital euro, too, is being designed with potential worldwide use in thoughts, in a method that respects different nations’ sovereignty and avoids undesirable foreign money substitution. It may in time act as a connector, including one other protected possibility for cross-border funds. Furthermore, like TIPS, the digital euro’s design contains multi-currency enabling options that might permit non-euro space nations to make use of the digital euro infrastructure to supply their very own digital currencies and facilitate transactions throughout these currencies.
Conclusion
Let me conclude.
Technological disruption is reworking cash and finance. For Europe, that is each a danger and a possibility. If we merely depend on overseas non-public options, we are going to import applied sciences, requirements and dependencies and danger fragmentation and instability. If we act collectively, we are able to construct an revolutionary, built-in and resilient digital monetary system that has the euro at its core however stays open and respectful of the sovereignty of our companions.
Our technique is evident. Central financial institution cash should stay accessible and usable, additionally in digital type, because the anchor of belief. Private and non-private sectors should work collectively. The Eurosystem gives settlement in central financial institution cash and customary requirements, thereby giving non-public intermediaries a sound foundation for competing and innovating. And markets, not the central financial institution, will determine which applied sciences and enterprise fashions succeed, inside a framework that retains cash and cost methods protected and built-in.
In retail funds, the digital euro will complement money and assist a really European marketplace for on a regular basis digital funds.
In wholesale markets, tokenised central financial institution cash via initiatives comparable to Pontes and Appia will make it attainable to settle digital asset transactions safely in central financial institution cash.
In cross-border funds, interlinking quick cost methods and exploring tokenised settlement will make funds cheaper, sooner and extra clear whereas preserving our financial sovereignty.
The selection earlier than us is easy: watch the way forward for cash being formed elsewhere, or assist design it ourselves. By performing now, in partnership with the non-public sector, Europe can lead within the transformation of cash, assist its competitiveness and resilience, and ship tangible advantages for residents and companies.
