Isabel Schnabel: Central banks should promote tokenization, stablecoins cannot replace central bank reserve settlement

Isabel Schnabel, a member of the Executive Board of the European Central Bank, stated in a speech at the Jackson Hole seminar that tokenization can bring about atomic settlement and programmability, which can help reduce cross-border repo settlement risks and integrate the financial infrastructure of the eurozone. Isabel Schnabel emphasized that stablecoins lack elastic liquidity supply and cannot replace central bank reserves as the ultimate settlement asset during times of pressure. They should be regarded as a regulated supplementary payment tool. Isabel Schnabel advocates that central banks should issue tokenized reserves natively on distributed ledgers. The European Central Bank is promoting Project Appia and Project Pontes, exploring the synchronization of TARGET services with DLT platforms to achieve native tokenization and 24/7 operation based on central bank currency.