EU Races to Tokenize Payments Before Stablecoins Dominate Digital Transactions

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<a href="https://jpyxx.com/eur-usd/">Europe</a> Wants to Tokenize Its Payment Backbone Before Stablecoins Do It First

Key Takeaways

  • The Bank of Italy wants the EU to tokenize SEPA before stablecoins fill the gap.
  • 64 institutions already settled €1.59 billion via DLT in ECB trials.
  • Bank-token volumes could reach $100-$140 trillion by 2030, per Citi.
  • The real competition now is stablecoins vs. CBDCs vs. tokenized deposits.

At a meeting on May 4, 2026, Chiara Scotti, Deputy Governor of the Bank of Italy, proposed a significant update to the Euro payments system. She urged the European Central Bank to expand the Single Euro Payments Area to include tokenized payments, warning that if Europe doesn’t act, people may start using U.S. dollar-based stablecoins for daily digital purchases due to their speed and convenience – features the eurozone currently lacks.

In May 2026, the total value of stablecoins reached $322 billion. Studies by the European Central Bank (ECB) indicate that increasing use in rapidly developing countries such as India and Brazil could increase that value to $730 billion. European leaders aren’t simply watching this as a new financial trend; they see it as a potential threat to their control over currency, and Italy’s central bank is taking it very seriously.

Why the Current System Falls Short

Scotti’s main goal is to modernize Europe’s financial infrastructure. Currently, transferring money between European banks is a slow process relying on outdated systems like SWIFT and requiring lots of manual checks. Tokenized money offers a solution by using a shared digital record to instantly transfer and finalize payments – a process known as instant or T+0 settlement. Applying this to the existing SEPA system could create a secure, public digital currency for Europe, instead of relying on private companies to lead the way in digital finance.

This plan expands on previous work done by the ECB. From 2023 to 2024, the bank conducted extensive trials of a new digital technology, involving 64 institutions like the Bank of Italy. These participants processed over 200 transactions totaling more than €1.59 billion using central bank money. Importantly, using central bank money significantly reduces risk typically associated with standard banking processes. These trials proved the technology can efficiently handle large financial transactions while maintaining the high level of security the financial system requires.

Two Projects, One Direction

The European Central Bank (ECB) identified two main areas of focus from their recent investigations. Project Pontes is a short-term initiative, scheduled to launch in the third quarter of 2026, that will link the existing payment system with new digital platforms used by financial institutions. Project Appia is a longer-term plan, extending to 2028, to explore the possibility of a shared digital ledger or a network of compatible platforms for digital assets. Alongside these projects, the ECB is also developing a retail digital euro, with testing starting in mid-2026 and a planned launch in 2029.

The Bank of Italy’s suggestion offers a fresh perspective. Instead of creating a completely new system, they propose leveraging the existing SEPA network – a highly successful financial infrastructure – to handle tokenized settlements. This approach is practical because SEPA already benefits from established networks, regulations, and trust, things a new tokenized payment system would take years to build. By adding tokenization, SEPA could gain the programmability and faster settlement speeds currently offered by private stablecoins, benefits that aren’t available with traditional public money.

Tokenized Deposits: The Commercial Banking Play

Banks aren’t waiting for official rules before exploring digital versions of deposits. Several large European banks are already turning the idea of “tokenized deposits” – digital records of bank balances using secure technology – into actual products. Unlike some other digital currencies, these tokenized deposits operate within existing regulations, are protected by deposit insurance, and don’t require users to rely on a private company to safeguard their money. This is especially appealing to businesses managing large sums, where security is as important as speed. In fact, Citi estimates that transactions using these bank-backed tokens could reach $100 billion to $140 trillion by 2030, potentially representing 5% of all major global payments.

Tokenization offers benefits beyond just faster payments. By swapping sensitive data like account and card numbers with temporary, random tokens – which are useless for fraud outside of a single transaction – it significantly lowers the risk of payment fraud. Experts believe this could reduce fraud by as much as 40%, which is a substantial improvement for the financial system, considering it processed €116 trillion in non-cash transactions in just the first half of 2025.

Public Money as the Non-Negotiable Foundation

As a crypto investor, I’ve been paying attention to what people like Scotti are saying, and it’s interesting what they *aren’t* saying. They aren’t saying crypto or stablecoins are useless, or that the private sector can’t come up with cool new tech. What they *are* getting at, and what the European Central Bank seems to believe, is that trust in any money system ultimately comes down to who backs it. They worry that building a financial system mainly on privately issued digital assets could make things unstable, and that public, government-backed systems would be more secure.

European regulators are now trying to determine if they can act quickly enough to create a truly competitive system, instead of just one that *looks* safe on paper.

This article is for informational purposes only and shouldn’t be considered financial, investment, or trading advice. Coindoo.com doesn’t support or suggest any particular investment or cryptocurrency. Before making any investment choices, be sure to do your own research and talk to a qualified financial advisor.

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2026-05-05 18:27