ECB | A Highway for the Future of Europe’s Digital Finance

Blog|  Piero Cipollone, Member of the Executive Board of the ECB

As payments and financial markets go digital, central bank money must evolve too. Through initiatives such as Pontes and Appia, the Eurosystem is working with market participants to ensure that tokenised finance can settle safely in central bank money, supporting innovation, integration and Europe’s financial sovereignty.

Technology is transforming how we communicate, travel, work and pay. The way that central banks issue money also needs to change, to meet the evolving needs of the societies we serve.

Issuing money is at the very core of what central banks do. Yet most of the money we use in our day-to-day transactions is created by the private sector – for example, when a bank finances a mortgage. Ultimately, people accept this private form of money as payment because they have the option to convert it, on a one-to-one basis, into central bank money – the safest of assets and the reference point that anchors the entire system. This interplay helps build and maintain trust.

Central bank money comes in two forms. For our everyday payment needs we have cash. And as our lives increasingly move online, the Eurosystem is developing the digital euro – a digital form of cash to complement banknotes and coins.

Meanwhile, in wholesale financial markets, central bank money takes the form of the deposits banks hold at their central bank, recorded as entries on its books. Banks can use these deposits for large-volume transactions and to settle payments among themselves. This central bank money provides the bedrock of today’s wholesale financial market infrastructures.

But wholesale financial markets are not immune to change. Thanks to tokenisation and distributed ledger technologies (DLTs), it will be possible to represent financial assets such as bonds as digital tokens – or, put simply, files – that can be transferred and updated more efficiently than is currently the case. These new technologies hold the promise of greater innovation, efficiency and integration across financial markets.

With tokenised assets and DLTs, transactions will be settled faster and more efficiently, lowering processing costs and risks. The entire lifecycle of an asset – from trading to settlement to custody – will run on the same platform, available 24/7. Cross‑border activity will become simpler and cheaper, with lower costs across the board. Smart contracts will enable further innovative solutions. More efficient and integrated financial markets will also mean cheaper funding for the real economy.

To reap the benefits of these technologies, investors will need a safe asset to settle transactions – central bank money. And this is exactly what we are working towards.

Thanks to the Eurosystem’s Pontes initiative, we will already be able to offer a way to settle DLT‑based wholesale transactions in central bank money in the third quarter of 2026. We will do so initially by connecting our financial backbone – the TARGET Services – to these new DLT platforms. This will provide the safety and institutional credibility that is needed if tokenised finance is to flourish in Europe. And this is just the beginning.

To fully realise the potential of tokenisation and DLTs, investors will need central bank money to be more directly integrated on these platforms. With this goal in mind, this week we published the roadmap for our Appia initiative.

The aim of Appia is to design – together with market participants – the next generation of Europe’s financial infrastructure. This process will guide our own gradual, continuous enhancements of Pontes to ensure that it evolves in line with Appia. But it will also steer the market towards building its own solutions and infrastructures in a way that ensures competition, integration and innovation for European financial markets.

Underpinning all this will be safe, tokenised euro central bank money, giving the market the settlement anchor it needs to grow safely. Market participants have been clear that this is essential. Appia will be developed through a broad public‑private partnership, and the final design will reflect extensive collaboration through experiments, proofs of concept and common standards.

There is one more dimension to consider. In today’s world, financial infrastructure can have geopolitical implications. If Europe does not build its own digital roads, it risks having to rely exclusively on those built by others. To avoid sleepwalking into such a situation, we must not succumb to complacency or fall behind. Europe has both the technology and the means to avoid this dependency.

With Appia, an integrated European ecosystem will replace today’s fragmented infrastructures. It will support efforts to develop a savings and investments union, while ensuring that the euro remains the trusted anchor of Europe’s digital economy.

Change is inevitable – but how we respond to it is up to us. Through Appia, Europe is choosing to shape its own digital financial space.

Compliments of the European Central Bank