ECB Pushes Ahead With Vision for an Integrated European Market for Tokenised Assets

The European Central Bank is advancing its plans to create an integrated European market for tokenised assets, with Executive Board member Piero Cipollone warning that the emergence of fragmented digital platforms could worsen existing divisions across Europe’s capital markets.

Speaking on Wednesday at the Deutsche Bundesbank’s Symposium on “Future of payments: trends and innovations in Germany and Europe” in Frankfurt, Cipollone said the ECB was now translating into action a vision it had first outlined two years ago through its Pontes and Appia projects.

“Today, I will discuss the next steps in turning that vision into reality,” Cipollone said.

According to Cipollone, tokenisation and distributed ledger technology, or DLT, have the potential to improve the efficiency of financial markets by representing and transferring assets as programmable digital files. Such technology could allow financial markets to operate around the clock, with greater automation and a reduced need for intermediaries.

However, he cautioned that the growth of incompatible digital infrastructures could result in a new and potentially more serious form of market fragmentation.

“This transformation also poses a risk: a proliferation of incompatible platforms could reproduce, or even deepen, the current fragmentation of Europe’s capital markets,” Cipollone said.

Europe’s financial markets remain highly fragmented, with 31 central securities depositories, 14 central counterparties and 323 trading venues currently operating across the region.

Cross-border settlement also remains limited. In 2023, more than 95 per cent of securities transactions, measured by both volume and value, were settled between parties using the same individual central securities depository, according to Cipollone.

Tokenisation could help address some of these inefficiencies by bringing issuance, trading, clearing, settlement, custody and asset servicing into a common digital environment.

Transactions could be carried out conditionally and atomically, ensuring that the cash and asset components of a transaction settle simultaneously—or not at all.

Smart contracts could further automate a range of activities, including coupon payments, collateral transfers and compliance checks.

“Tokenisation is therefore not merely an incremental improvement to one stage of a financial transaction,” Cipollone said, arguing that the technology could instead “reshape the entire financial value chain”.

The global market, he said, is already moving beyond experimentation and towards early adoption. The value of tokenised traditional assets recorded on public blockchains increased by approximately fivefold between March 2025 and March 2026.

In the United States, one private platform handled an average of $354 billion in tokenised repo transactions each day in March 2026, representing four times its average daily volume compared with a year earlier.

European financial institutions are also making progress in developing tokenised bonds, deposits, collateral and settlement solutions, while central securities depositories across the region have announced major initiatives aimed at tokenising securities on a large scale.

The Eurosystem began accepting marketable assets issued through DLT-based services at European central securities depositories as eligible collateral in March, Cipollone said.

Despite the rapid development of the sector, tokenised real-world assets remain small in comparison with global financial markets and continue to face limited liquidity and relatively low levels of secondary-market activity.

Cipollone identified three key risks that Europe must avoid as tokenised finance expands: fragmentation, the loss of central bank money as the monetary anchor and excessive dependence on external providers.

The ECB's objective is to support the settlement of DLT-based transactions using central bank money while encouraging an integrated, competitive and innovative European ecosystem for payments and securities and protecting the continent’s resilience and strategic autonomy.

The Eurosystem has already completed more than 50 trials and experiments involving 64 market participants during 2024. Those exercises showed that central bank money could be used to settle transactions conducted on DLT platforms.

Cipollone said the results demonstrated that access to central bank money was “not merely an additional feature but a condition” for tokenised finance to expand safely and on a large scale.

The lessons from those trials have been incorporated into the ECB’s Pontes and Appia projects.

Pontes is designed to connect market-based DLT platforms with the Eurosystem’s TARGET Services, enabling the cash component of transactions to settle in central bank money.

The ECB plans to launch Pontes this year, initially with attractive pricing and only one-off onboarding fees. The service is subsequently expected to extend its operating hours to 22.5 hours on each business day and offer immediate settlement finality within the Eurosystem’s DLT infrastructure. A fully 24/7 service is planned by mid-2028, accompanied by increased programmability, resilience and multi-currency capabilities.

“Central bank money does not carry credit or liquidity risk. What’s more, it serves as the common settlement anchor across the financial system,” Cipollone said.

Appia, meanwhile, is focused on the broader architecture, standards and governance required for a European tokenised financial ecosystem.

Its roadmap includes work on interoperability and common standards, monetary policy implementation, collateral management, future infrastructure for tokenised central bank money, cross-border transactions, and the legal and regulatory framework. The project aims to deliver a blueprint for an integrated European tokenised financial ecosystem by 2028.

Cipollone said Pontes and Appia should be seen as complementary elements of a single strategy. Operational experience gained through Pontes will help shape Appia, while the findings from Appia will guide the gradual evolution of Pontes.

For tokenised finance to expand successfully, Cipollone identified three essential conditions: common standards and interoperability, cooperation between public and private institutions, and an integrated legal framework.

“Competition should be in services, quality and price, not through incompatible standards or walled gardens,” Cipollone said.

He stressed, however, that technological interoperability by itself would not be sufficient to create a genuinely integrated market.

“A genuinely integrated tokenised ecosystem must have five capabilities,” he said, explaining that systems need to be interoperable, assets must be transferable and portable, issuers and public authorities should retain appropriate control, and assets must be programmable within a safe and legally valid framework.

Cipollone called for close cooperation between public authorities and private-sector participants to ensure that the different components of the financial system—including issuance, trading, settlement, custody, collateral management and asset servicing—develop together rather than in isolation.

He also warned that technological progress could not resolve divisions created by fragmented legal systems. Greater legal clarity and harmonisation across the European Union are needed in areas such as ownership rights, settlement finality, liability, custody, asset servicing and the legal enforceability of outcomes produced by smart contracts.

“Technical interoperability without legal compatibility will remain incomplete and fail to overcome fragmentation,” he said.

Cipollone said Europe had reached a decisive stage in determining the future direction of tokenised finance and urged policymakers and market participants to act quickly.

“If we act now, we can do more than just modernise settlement,” he said.

“We can use technological change to help build something Europe has sought for decades: a deeper, more innovative and more competitive capital market,” he added. 

By fLEXI tEAM