Bank of Italy's Deputy Governor Proposes Tokenized SEPA Framework for Europe
Italy's central bank deputy governor has proposed evaluating tokenized SEPA payment systems, while the ECB conducts experiments with digital payment frameworks based on tokenization to counter potential stablecoin dominance.
Financial institutions across Europe should evaluate the possibility of expanding the Single Euro Payments Area (SEPA) to include tokenized payment capabilities, according to Chiara Scotti, Deputy Governor at the Bank of Italy, as regulatory authorities seek methods to maintain euro-based settlement at the core of digital financial infrastructure.
During a Monday address at Rome's Digital Assets and Monetary Policy Transmission workshop, Scotti described a tokenized SEPA expansion as a significant "important area for reflection," noting that Europe's current payment infrastructure provides scalability, standardized frameworks, and cross-border interoperability.
These remarks arrive as the Eurosystem moves forward with preparations for a Pontes pilot program, an initiative utilizing distributed ledger technology for settlement purposes that aims to connect DLT-based market platforms with TARGET Services, enabling transaction settlement in central bank currency. The trial launch is anticipated during the third quarter of 2026.
Simultaneously, the European Central Bank (ECB) is advancing Appia, a more extensive strategic plan for Europe's tokenized financial infrastructure scheduled for completion in 2028, as policy decision-makers evaluate the appropriate coexistence framework for tokenized deposits, stablecoins, and central bank digital currency.
According to the ECB, the institution is investigating methods to integrate central bank currency onto distributed ledger technology platforms, driven by apprehensions regarding the widespread adoption of stablecoins not denominated in euros, which could produce "serious consequences for Europe's monetary sovereignty," including weakening the euro's international standing and establishing reliance on foreign-issued settlement instruments.
ECB says stablecoin adoption may shift bank deposits
The ECB has on previous occasions articulated apprehensions connected to the broad acceptance and use of stablecoins.
Within a report released in November 2025, the ECB indicated that widespread adoption of stablecoins could result in households substituting portions of their traditional bank deposits with stablecoin balances, potentially triggering substantial outflows from banking institutions.
Significant growth in stablecoins could cause retail deposit outflows, diminishing an important source of funding for banks and leaving them with more volatile funding overall.
In a working paper released on March 4, 2026, the ECB underscored additional risks, noting that the adoption of stablecoins triggers a "deposit-substitution mechanism, whereby funds shift from retail bank deposits to digital assets."
Subsequently on March 23, Piero Cipollone, a member of the ECB's Executive Board, said that both tokenized deposits and stablecoins need tokenized central bank money as a public settlement anchor for scaling Europe's tokenized financial system, Cointelegraph reported.