EU weighs tokenized SEPA payments, says Bank of Italy official

European policymakers are weighing how far tokenization can extend Europe’s payments fabric, signaling that the euro area could move beyond traditional rails to a tokenized settlement layer in the coming years. A senior Italian central bank official outlined tokenized SEPA as an important area for reflection, while the Eurosystem advances two parallel tracks aimed at linking distributed ledger technology (DLT) with central bank money and existing settlement rails.

In a speech delivered at the Digital Assets and Monetary Policy Transmission workshop in Rome, Bank of Italy Deputy Governor Chiara Scotti described a tokenized extension of SEPA as a pathway with clear potential due to Europe’s scale, shared standards and interoperability. She underscored that Europe’s current payments framework already offers a foundation that could support broader tokenization of settlement, with careful attention to governance, risk controls and public money as an anchor. The speech was published in early May 2026, and Scotti framed the topic as one that deserves ongoing policy consideration.

Key takeaways

• Europe is actively exploring a tokenized extension of SEPA as part of its broader digital money agenda, with emphasis on interoperability and scale.
• The Eurosystem is preparing a pilot called Pontes to connect market DLT platforms with TARGET Services, enabling settlement in central bank money, with completion targeted for the third quarter of 2026.
• ECB’s Appia project represents a longer-term roadmap for Europe’s tokenized financial ecosystem, aiming for a 2028 conclusion and addressing how tokenized deposits, stablecoins and central bank money can coexist.
• New ECB analyses warn that widespread stablecoin adoption could lead to retail deposit outflows, potentially altering banks’ funding profiles and raising liquidity concerns.
• Policy makers are signaling that tokenized deposits and stablecoins will require tokenized central bank money as a public settlement anchor to scale Europe’s tokenized finance system.

Two tracks shaping Europe’s tokenized future

The first track centers on practical settlement experiments that could pave the way for broader digitization of money. The Pontes project, described by Eurosystem officials as a distributed ledger settlement initiative, is designed to bridge market DLT platforms with the central banking settlement layer (TARGET Services) and finalize payments in central bank money. The aim is to test how a multi-DLT ecosystem could operate with a common settlement anchor, addressing questions of interoperability, security and operational risk. Officials expect a pilot completion in the third quarter of 2026, signaling a concrete milestone in Europe’s exploration of tokenized settlement rails.

A separate, longer-term effort is Appia, the European Central Bank’s roadmap for tokenized finance that envisions a more comprehensive framework for tokenized deposits, stablecoins and central bank money. Appia is not a single implementation but a strategic program that seeks to define how tokenized financial assets will interact with existing eurozone monetary infrastructure. The roadmap, with milestones through 2028, reflects a deliberate approach to balancing innovation with financial stability and monetary sovereignty.

The ECB has also underscored the importance of safeguarding monetary sovereignty in the face of rapid tokenization. A 2026 ECB statement notes concerns about non-euro stablecoins, citing the potential for serious consequences if euro-denominated settlement assets are displaced by foreign stablecoins. The central bank has repeatedly emphasized that any broad shift toward digital assets must be anchored, supervised and harmonized with trusted public money.

These themes sit alongside ongoing policy work and research. In March 2026, the ECB published papers highlighting risks associated with deploying stablecoins at scale. One working paper emphasized a “deposit-substitution mechanism,” where funds migrate from retail bank deposits to digital assets, a development that could intensify funding volatility for banks. A later focus paper reiterated concerns that stablecoin adoption could impact the stability and resilience of the traditional banking model if not accompanied by robust settlement rails and risk controls.

Stability concerns and policy context

The ECB’s public-facing analysis aligns with a broader European hesitation about stability and governance in a tokenized money regime. While tokenization offers potential efficiency gains and cross-border interoperability, policymakers warn that widespread use of stablecoins and other digital assets could complicate bank funding structures and monetary policy implementation if settlement assets or payment rails become fragmented or if retail deposits migrate rapidly into private digital money. The discussion continues to blend technical experimentation with macroeconomic prudence, a balance policymakers describe as essential for Europe’s monetary sovereignty.

Readers should note that European policymakers have not dismissed innovation; instead, they are pursuing a staged approach. The Pontes pilot seeks to demonstrate how market participants can operate across multiple DLT environments while using central bank settlement rails. Appia, by contrast, is a forward-looking framework aimed at ensuring tokenized assets, deposits and currencies can scale without compromising financial stability. Together, they signal a strategy of incremental adoption, paired with guardrails and cross-border standards that can help fuel adoption while preserving trust in euro-denominated money.

In related coverage, Cointelegraph highlighted that UBS is already engaging in a Swiss franc stablecoin sandbox with five banks, illustrating how large financial institutions are actively testing tokenized solutions within controlled settings. The European debate, however, remains focused on ensuring that tokenized money strengthens rather than undermines monetary sovereignty and financial stability across the euro area.

The March 2026 statements from Piero Cipollone, a member of the ECB’s Executive Board, reinforced this view, noting that tokenized deposits and stablecoins should be anchored by tokenized central bank money to enable a scalable European tokenized finance system. This framing aligns with the broader policy objective of maintaining strong public settlement rails as the private sector experiments with new forms of digital money.

In sum, Europe stands at a crossroads where tokenization could reshape payments, settlement and liquidity management, while policymakers seek to preserve monetary sovereignty and financial stability. The Pontes pilot and Appia roadmap are not mere experiments; they are signaling a measured path toward a digitized euro that integrates public money, tokenized assets and cross-border interoperability.

For market participants, the implications are clear: investors, users and builders should monitor the Pontes pilot’s outcomes, the Appia timeline and any policy updates on tokenized money. The balance between innovation and resilience will shape how quickly euro-denominated tokenized finance can scale, and how central banks coordinate with private sector platforms to ensure secure, efficient settlement in the years ahead.

As the Eurosystem continues to publish milestones and the ECB advances its strategic roadmap, observers should watch for concrete technical specifications, governance frameworks and cross-border alignment that will determine how tokenized money interacts with traditional banking products, stablecoins and cross-border payments. The coming quarters are likely to reveal whether Europe can usher in a tokenized settlement regime that preserves monetary sovereignty while enabling broader financial innovation.

Readers should stay tuned for further updates on Pontes progress, Appia milestones and any policy clarifications from the Bank of Italy and the ECB as Europe tests the boundaries of tokenized monetary infrastructure.