MONEY IN THE DIGITAL AGE
SPEECH BY PIERO CIPOLLONE, MEMBER OF THE EXECUTIVE BOARD OF THE ECB, AT ISTITUTO AFFARI INTERNAZIONALI
Frankfurt am Main, 28 May 2026
For centuries, central banks have issued money and safeguarded its value. That mandate has not changed.
What has changed is the technological environment surrounding it. Consumers are increasingly engaging in digital payments, financial institutions are exploring innovative technologies, and new players along with infrastructures are reshaping the usage of money across the economic spectrum.
To ensure that money remains stable, trusted, and user-friendly, central banks need to evolve alongside these technological advancements.
If central bank money fails to keep pace with technological changes, it risks becoming irrelevant in critical sectors of the economy, thereby weakening the role of public money as a stabilizing anchor and heightening fragmentation and risks within the financial system. We believe the right policy response is to embrace digitalization, extending central bank money into this modern technological landscape while maintaining essential qualities: security, uniformity, and reliability.
ADAPTING TO DIGITALIZATION IN MONEY AND PAYMENTS
Digitalization is making a profound impact on every facet of our monetary and payment systems, presenting specific challenges for the euro area.
Retail payments are increasingly transitioning to digital and platform-based models. Concurrently, wholesale financial markets are evolving as tokenization and distributed ledger technology (DLT) become more prominent. When effectively employed, digitalization has the potential to lower costs and streamline cross-border payments, while mitigating risks associated with fragmentation.
Policy responses should be coherent in addressing these three areas, ensuring that innovation, efficiency, and integration progress without compromising financial stability and trust in central bank money.
These responses must also account for the unique circumstances in each jurisdiction. In the euro area, we encounter three significant challenges.
Firstly, there is a lack of a European digital payment solution that operates uniformly and seamlessly across the euro area. Current offerings from European private digital payment providers are confined to national scales and specific use cases, while central bank money is solely represented by physical banknotes and coins, which are unsuitable for online transactions. This reliance on a handful of non-European providers for retail payments is a clear risk.
Secondly, in the realm of wholesale markets, most high-value transactions are settled in central bank money through TARGET services. However, this scenario could change if central bank money does not adapt to tokenization, which possesses the potential to revolutionize financial markets. Tokenization and DLT can enhance capital market efficiency, but without tokenized central bank money at their foundation, the new ecosystem is likely to rely on fragmented pools of settlement assets.
Lastly, cross-border payments remain inadequate — slow, costly, and lacking transparency. The ongoing digital transformation could exacerbate fragmentation in this domain. Given the euro area’s highly open economy, where international trade constitutes approximately half of GDP, this is a critical issue.
MODERNIZING CENTRAL BANK MONEY
We are addressing these challenges with three core components of our comprehensive payment strategy.
Firstly, we are preparing for the potential issuance of a digital equivalent of cash: the digital euro.
Secondly, we aim to facilitate DLT-based transaction settlements in central bank money starting September this year.
Lastly, we are working on interconnecting rapid payment systems to enhance cross-border transactions globally.
In light of technological advancements, we have a responsibility to redefine how public money is provided to ensure it continues to be a risk-free asset and a fundamental source of trust that allows the private sector to innovate and grow.
Private payment solutions can offer efficiency, modern functionalities, and enhancements that serve consumers better.
The function of central banks is not to substitute the private sector; rather, we must ensure public money retains its role as the cornerstone of the financial system as technology progresses.
A DIGITAL EURO FOR RETAIL TRANSACTIONS
As digitalization transforms daily payment methods for households and businesses, the accessibility of central bank money is limited to cash. This raises a pressing question: how can public money stay relevant and user-friendly in an increasingly digital economy?
The digital euro will serve as a digital cash equivalent for routine retail transactions. The goal is not to replace existing cash or private payment solutions but to enhance current systems, ensuring that central bank money is always an option available throughout Europe.
The vision for the digital euro encompasses it being a payment instrument rather than an investment vehicle. It is intended to complement the existing payment ecosystem public-private dynamic without yielding interest and with constraints on individual holdings to preserve financial stability and ensure continual credit provision from banks.
Access to a public payment option, digital and usable across the euro area is essential. The digital euro will cater to both online and offline transactions, facilitating resilience and safeguarding privacy. Furthermore, by decreasing reliance on dominant players, it is anticipated to lower costs for merchants and, ultimately, consumer prices.
The digital euro will hold legal tender status, and universally adopted standards at virtually all points of sale across the euro area will facilitate its acceptance everywhere. Banks and other providers will be encouraged to adopt this public infrastructure, thereby enhancing the payment services available at the European level. This approach simplifies the implementation of the digital euro, creating a consistent user experience across the euro area.
Assuming that European co-legislators endorse the regulation for the digital euro this year, we can expect pilot exercises and initial transactions to commence by mid-2027, with a potential launch for the first issuance in 2029. The incentive for private payment providers to expand their product offerings will not be delayed until then, as merchants are likely to begin adapting to these shared standards immediately following the regulation’s adoption.
A TOKENISED EURO FOR WHOLESALE TRANSACTIONS
Turning to wholesale transactions, we notice that financial markets are undergoing structural transformations. By digitizing financial assets into tokens—essentially files—tokenisation enables a more efficient transfer and updating of assets compared to existing processes. It allows the entire lifecycle of an asset—from trading to settlement to custody—to operate on a unified platform accessible 24/7, and supports automation through smart contracts, promising faster transactions with reduced costs.
However, this potential hinges on the existence of on-chain settlement assets in a tokenized format, whether they are private or central bank liabilities as seen presently.
Stablecoins are at the forefront of private solutions, having carved out a niche in crypto markets through their early adoption as tokenized settlement assets. Recently, they have been presented as a means to enhance cross-border payments and settle on-chain transactions of tokenized traditional assets. They offer speed, programmability, and continuous accessibility.
Despite this promise, stablecoins carry inherent credit and liquidity risks and may jeopardize financial stability. Their safety hinges on the caliber and liquidity of their reserves, effective regulatory oversight, and robust redemption arrangements. A significant uptake could fundamentally alter commercial banks’ roles in the maturity transformation process and as primary channels for real economy financing.
Nevertheless, stablecoins represent just one possible form of tokenized settlement assets. Alternatives such as tokenized deposits could serve as private substitutes. It will be interesting to see which, if any, of these private solutions will triumph or coexist.
Ultimately, the Eurosystem presumes that tokenized private monetary forms will gain from the provision of tokenized central bank money, which ensures risk-free settlement, guarantees payment finality, and bolsters confidence in market frameworks. These aspects should promote a vibrant tokenized ecosystem and enhance integration. With an expanded market, the demand for various tokenized settlement assets—private ones included—is likely to rise, mirroring the current coexistence of public and private settlement mechanisms.
To harness the benefits of tokenization for Europe and support the growth of an integrated European digital asset market, the Eurosystem is adopting a stepwise strategy.
We aim to connect market DLT platforms with our current TARGET services, facilitating the settlement of tokenized transactions in central bank money. This service, as part of our Pontes initiative, is anticipated to be operational by the third quarter of the year.
Our ongoing collaboration with the private sector seeks to establish a comprehensive vision for a fully integrated tokenized ecosystem, including feedback solicitation regarding the Appia roadmap introduced earlier this year. Our goal is to present a thorough blueprint by 2028.
This initiative aligns with the European Commission’s objectives to eliminate regulatory impediments, thereby promoting broader use of tokenization. The Commission has proposed augmenting and simplifying the DLT Pilot Regime, allowing firms to test and refine DLT applications. Concurrently, it is reforming Central Securities Depositories Regulation to facilitate large-scale participation of central securities depositories utilizing DLT. In the future, consideration should be given to developing a dedicated EU legal framework to enable seamless issuance, holdings, and transfer of tokenized assets across the EU.
INTERLINKING FAST PAYMENT SYSTEMS FOR CROSS-BORDER PAYMENTS
Addressing cross-border payments, despite advancements, these transactions remain comparatively sluggish, costly, and opaque relative to domestic payments. Such obstacles impact households, businesses, and financial institutions alike, with broader implications for international trade and financial integration, hence making remittances sluggish and expensive.
Tackling these hurdles is a collective international policy goal, which we actively support in line with the G20 cross-border payments agenda. However, the risk of fragmentation could worsen with the advent of new technologies if not properly addressed.
The Eurosystem’s TIPS infrastructure already facilitates instant payments not just in euro, but also in other currencies such as the Swedish krona and the Danish krone.
To mitigate inefficiencies related to cross-border payments further, we are working on interlinking rapid payment systems from numerous nations, including those beyond the European Union.
This approach of interlinking facilitates smooth international payments while safeguarding the monetary sovereignty of nations, which could be jeopardized through the proliferation of stablecoins based on dominant currencies. We aim to build upon existing structures, avoiding the creation of entirely new global systems, thereby promoting trust and respecting the monetary sovereignty of participating jurisdictions.
CONCLUSION
In conclusion, across retail, wholesale, and cross-border payments, our mission is to sustain trust and stability as technology transforms the way money is utilized.
The private sector will continue to champion innovation. The role of public sector entities, particularly central banks, is to modernize central bank money where necessary and ensure its availability across all facets, reaffirming its status as the cornerstone of the financial system.
Thank you.
1. ECB (2026), The Eurosystem’s comprehensive payments strategy, March 31.
2. Cipollone, P. and Elderson, F. (2026), “Digital euro: an opportunity for banks,” The ECB Blog, March 27.
3. ECB (2026), “ECB signs agreements with European standard setters to facilitate digital euro payments,” press release, April 24.
4. See Cipollone, P. (2026), “Sparking the transformation of finance: tokenisation and the role of central banks,” keynote address at the 24th Annual Symposium on “Building the Financial System of the 21st Century: an Agenda for Europe and the United States,” hosted by Harvard Law School and Program on International Financial Systems, Washington DC, April 15.
5. See Altavilla C., Boucinha M., Burlon L., Adalid R., Fortes R. and Maruhn F. (2026), “Stablecoins and Monetary Policy Transmission,” Working Paper Series, No 3199, ECB, Frankfurt am Main, and Cipollone, P. (2026), “Digital assets, payment efficiency and monetary policy,” speech at a workshop on digital assets and monetary policy transmission organized by the European Central Bank, Banca d’Italia, the Euro Area Business Cycle Network, and the Centre for Economic Policy Research, Rome, May 4.
6. See Lagarde, C. (2026), “Stablecoins and the future of money: separating functions from instruments,” speech by Christine Lagarde, President of the ECB, at the Banco de España LatAm Economic Forum in Roda de Bará, May 8.
7. See Cipollone, P. (2026), “Building the rails for Europe’s tokenised financial markets,” keynote speech at an event on “Building Europe’s integrated digital asset ecosystem: from vision to implementation” hosted by the House of the Euro, Brussels, March 23.
8. ECB (2026), Appia – paving the way for a future-ready, integrated financial ecosystem leveraging tokenisation and DLT.
9. See Cipollone, P. (2026), op. cit.
10. See Panetta, F. (2026), “Interconnect to stabilize: cross-border payments in a fragmenting world,” keynote speech at the Embassy of Italy to the United Kingdom on ”Cross-Border Payments at a Turning Point,” London, May 5.
11. See paragraph 16 in G20 (2020), G20 Riyadh Summit Leaders’ Declaration; Financial Stability Board (2020), Enhancing Cross-border Payments – Stage 1 report to the G20; Committee on Payments and Market Infrastructures (2020), Enhancing cross-border payments: building blocks of a global roadmap – Stage 2 report to the G20; and Financial Stability Board (2020), Enhancing Cross-border Payments – Stage 3 roadmap.
12. See Cipollone, P. (2026), “The quest for cheaper and faster cross-border payments: regional and global solutions,” speech at the BIS Annual General Meeting, Basel, June 27.
