During a recent keynote address delivered in Washington DC, Piero Cipollone, member of the European Central Bank’s (ECB) Executive Board, argued that tokenization and distributed ledger technology (DLT) represent a rare opportunity to break a century-old pattern in finance. Despite waves of technological progress—from electronic messaging to dematerialized securities—the real cost of linking borrowers and savers has barely budged.
In the United States and across major European economies such as Germany, France and the United Kingdom, the unit cost of financial intermediation has remained roughly constant at around 2 per cent of intermediated assets.
Cipollone warned that past innovations simply made the existing layered system of trading, clearing, custody and settlement run faster without changing its fundamental architecture.
Tokenization, he explained, belongs to a different category: it is a general-purpose technology capable of rewiring finance from the ground up.
By converting assets into digital tokens recorded on DLT networks, the entire life cycle of a security—issuance, trading, settlement and custody—can occur inside a single, always-available digital environment.
A shared source of truth eliminates repeated reconciliation, while smart contracts can automate coupon payments and other processes.
The result, in theory, is lower friction, simpler access and genuine cost savings passed on to end-users.
Yet Cipollone stressed that such gains are far from automatic. Like electricity in the early twentieth century, tokenization demands simultaneous adoption across all complementary parts of the market.
A liquid government bond market, for example, relies on secondary trading, repo facilities, derivatives and robust legal frameworks working in harmony.
Without coordinated movement, individual players face high upfront costs and uncertain payoffs, discouraging the shift.
Some intermediaries even benefit from the very frictions the new technology aims to remove.
To unlock broad benefits, Cipollone called for an integrated and competitive tokenized ecosystem.
Common standards and non-discriminatory access are essential to prevent fragmented liquidity or “walled gardens” that raise barriers for new entrants.
The design choices made now—whether a single shared ledger or multiple interoperable networks—will determine who captures the gains.
The ECB is already acting as both anchor and catalyst.
Since late March 2026, marketable assets issued on DLT have been eligible as collateral in Eurosystem credit operations.
From September, the Pontes project will offer tokenized central bank money for settling DLT transactions, building on 2024 trials that handled roughly €1.6 billion across nine jurisdictions.
This risk-free settlement asset is viewed as critical to reaching the critical mass that makes tokenized markets scalable and attractive while preserving European monetary sovereignty.
Complementing this operational push, the ECB published the Appia roadmap in March 2026.
The initiative sets out a 2028 blueprint for a European tokenized financial ecosystem, covering technical standards, interoperability, monetary-policy implementation and legal foundations.
It will evaluate the optimal network architecture and ensure governance supports competition and integration.
Cipollone concluded that tokenization’s ultimate success is an institutional question. With the right policy choices today, Europe can build a financial system that truly narrows the gap between savers and borrowers.