Europe must urgently evaluate extending the Single Euro Payments Area (SEPA) into tokenized payments, a senior Bank of Italy official has warned, as the European Central Bank (ECB) pilots new infrastructure to counter the rise of non-euro stablecoins. Deputy Governor Chiara Scotti described a tokenized SEPA as an “important area for reflection” during a speech at the Digital Assets and Monetary Policy Transmission workshop in Rome on Monday. Her call comes as the Eurosystem prepares a pilot for Pontes, a distributed ledger technology (DLT) settlement initiative, expected by the third quarter of 2026.
Why Tokenized SEPA Payments Matter for Europe
Tokenized SEPA payments would allow euro-denominated transactions to settle on blockchain or DLT networks while maintaining the scale, shared standards, and interoperability of the existing SEPA framework. Scotti emphasized that Europe’s current payments infrastructure already processes billions of transactions annually. Extending it into tokenized forms could prevent fragmentation and keep euro settlement central to digital finance.
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The Bank of Italy official noted that without such an extension, Europe risks losing monetary sovereignty to foreign stablecoins. The ECB has previously warned that widespread stablecoin adoption could shift bank deposits into digital assets, undermining traditional funding sources. In a November 2025 report, the ECB stated that significant stablecoin growth “could cause retail deposit outflows, diminishing an important source of funding for banks.”
ECB’s Pontes Pilot: A Key Step for Tokenization
The Pontes pilot, expected to launch in Q3 2026, aims to link market DLT platforms with TARGET Services, allowing transactions to settle in central bank money. This initiative directly supports the tokenized SEPA vision by providing a public settlement anchor. The ECB is also developing Appia, a longer-term roadmap for Europe’s tokenized financial ecosystem, expected to conclude in 2028.
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Appia will explore how tokenized deposits, stablecoins, and central bank money can coexist. The ECB has made clear that tokenized central bank money is essential for scaling Europe’s tokenized system. On March 23, ECB Executive Board member Piero Cipollone stated that both tokenized deposits and stablecoins “need tokenized central bank money as a public settlement anchor.”
Stablecoin Risks Driving Policy Action
The ECB’s concerns are not theoretical. In a working paper published on March 4, 2026, the ECB highlighted that stablecoin adoption induces a “deposit-substitution mechanism, whereby funds shift from retail bank deposits to digital assets.” This shift could leave banks with more volatile funding and reduce their lending capacity.
Scotti’s speech directly addressed these risks. She argued that a tokenized SEPA extension would allow Europe to retain control over its payment infrastructure while embracing innovation. “We must ensure that the euro remains the anchor of Europe’s financial system,” she said.
How Tokenized SEPA Payments Could Work
Under a tokenized SEPA framework, banks and payment providers could issue tokenized euro deposits on DLT platforms. These tokens would represent claims on central bank money, settled through TARGET Services. The system would maintain SEPA’s core principles: equal treatment, pan-European reach, and real-time settlement.
Key benefits include:
- Interoperability: Tokenized SEPA would connect with existing banking rails, avoiding isolated silos.
- Speed: DLT-based settlement could reduce transaction times from hours to seconds.
- Security: Central bank money settlement eliminates credit risk.
- Compliance: The framework would embed anti-money laundering and know-your-customer rules at the protocol level.
Industry Reactions and Next Steps
Market participants have welcomed the Bank of Italy’s push. Several European banks are already experimenting with tokenized deposits. In March 2026, UBS partnered with five banks for a Swiss franc stablecoin sandbox. However, Scotti stressed that private-sector initiatives alone are insufficient without public infrastructure.
The ECB’s Pontes pilot will test the technical feasibility of linking DLT platforms with central bank money. If successful, it could pave the way for a full tokenized SEPA rollout. The Bank of Italy is expected to publish a consultation paper on the topic later this year.
Conclusion
The Bank of Italy’s call to explore tokenized SEPA payments represents a key moment for European digital finance. As the ECB pilots Pontes and develops Appia, the region faces a clear choice: embrace tokenization under public oversight or risk ceding monetary sovereignty to foreign stablecoins. Tokenized SEPA payments offer a path to modernize Europe’s payment infrastructure while preserving the euro’s central role. Policymakers, banks, and technology providers must now work together to turn this vision into reality.
FAQs
Q1: What are tokenized SEPA payments?
Tokenized SEPA payments refer to euro-denominated transactions settled on blockchain or distributed ledger technology (DLT) networks, while maintaining the standards and interoperability of the existing Single Euro Payments Area (SEPA) framework.
Q2: Why does the Bank of Italy want tokenized SEPA?
Deputy Governor Chiara Scotti argues that tokenized SEPA would keep euro settlement central to digital finance, prevent fragmentation, and counter the risk of non-euro stablecoins undermining monetary sovereignty.
Q3: What is the ECB’s Pontes pilot?
Pontes is a distributed ledger technology settlement initiative that will link market DLT platforms with TARGET Services, allowing transactions to settle in central bank money. The pilot is expected in Q3 2026.
Q4: How do stablecoins threaten European banks?
The ECB warns that widespread stablecoin adoption could cause retail deposit outflows, reducing bank funding and increasing volatility. A March 2026 ECB paper describes this as a “deposit-substitution mechanism.”
Q5: When could tokenized SEPA payments become reality?
The ECB’s Appia roadmap is expected to conclude in 2028, with the Pontes pilot in 2026. A full tokenized SEPA rollout would likely follow successful trials and regulatory approval.
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