ECB proposes three models for central bank money on blockchain

The European Central Bank said on Tuesday it is evaluating three models for putting central‑bank money on a public blockchain, a step that could reshape how banks settle payments across the euro area. The proposals were unveiled in a policy paper released ahead of the ECB’s June monetary policy meeting, and they outline direct, indirect and hybrid approaches to issuing digital euros onchain.

The move comes as commercial banks and fintech firms race to build blockchain‑based settlement infrastructure that promises faster, cheaper cross‑border transfers. Since the pandemic, the eurozone has seen a surge in digital payments and a growing appetite for central‑bank digital currencies (CBDCs) worldwide. The ECB has already run pilots in the Netherlands and France, testing token‑based and account‑based solutions. Regulators say a blockchain‑compatible euro could reduce settlement risk and improve transparency, while also keeping the euro competitive against other sovereign digital currencies such as the digital yuan.

The three models differ in how the digital euro would be held and transferred. In the direct model, the ECB would issue tokens that banks could move peer‑to‑peer on a public ledger, with the central bank retaining full control over the ledger’s rules. The indirect model would keep the euro in traditional accounts, using blockchain only as a settlement layer that records transfers without the ECB directly issuing tokens. The hybrid model blends the two, allowing banks to hold tokenised euros while the ECB oversees a permissioned network that validates transactions. ECB Governor Christine Lagarde said the paper “provides a clear roadmap” and that the bank will consult with national central banks and industry participants before any rollout. Market analysts note that the hybrid option may gain traction because it balances innovation with regulatory oversight.

The ECB plans to publish a detailed implementation framework by the end of the year, followed by a pilot phase in 2025 that could involve a limited group of banks and payment service providers. If successful, the on‑chain euro could be used for high‑value settlements, reducing reliance on legacy clearing houses. Stakeholders will watch closely as the ECB’s choices could set a precedent for other central banks and shape the future of European finance.