The Bank of Italy notes that the European Union may need to evaluate the development of tokenized versions of existing payment frameworks, suggesting a possible change in the structure of digital transactions across the region.
The proposal focuses on adapting the Single Euro Payments Area (SEPA) to ongoing technological changes, particularly as digital forms of currency and distributed ledger systems become more prominent in financial infrastructure.
Speaking on the issue, Deputy Governor Chiara Scotti emphasized that innovations in the financial system are prompting new scrutiny of the role of central banks in maintaining financial stability. He pointed out that while emerging technologies enable faster and more programmable transactions, these features do not add value to money, but rather how payments work.
Mr Scotti said trust remains a hallmark of money, supported by regulatory bodies and regulatory frameworks. His comments raise concerns that technological advances alone will not redefine financial fundamentals, even as digital payment tools evolve.
Pressure from private digital money
This discussion comes as financial innovations introduce new forms of privately issued digital money, such as electronic money tokens and tokenized bank deposits recorded on distributed ledgers. According to the Bank of Italy, these developments offer alternative mechanisms for the storage and transfer of value, potentially reducing dependence on the traditional banking system.
Such changes raise questions about how central banks can maintain oversight of the financial system while responding to innovation. Scotti noted that ensuring compatibility between public and private currencies has become a key priority for policymakers.
SEPA and digital euro attract attention
The EU’s payments infrastructure has changed since the introduction of the euro, with SEPA enabling uniform cashless transactions between participating countries. However, Scotti suggested that the next stage of development could include integrating tokenization into this framework.
At the same time, the European Central Bank (ECB) continues to work on its digital euro project, which is partly supervised by board member Piero Cipollone. The program aims to maintain the relevance of central bank money in an increasingly digital economy.
Scotti concluded that considering a tokenized extension of SEPA, alongside a digital euro, could be a logical step to adapt Europe’s payment systems to ongoing technological changes while maintaining monetary control.
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