The member of the Executive Board of the European Central Bank (ECB) Piero Cipollone warned on Wednesday 15 April in Washington against the risk that financial innovations linked to tokenisation would not produce the expected efficiency gains without an appropriate European institutional framework.
Despite past technological advances, the cost of financial intermediation has so far remained broadly stable, but the Italian economist believes that tokenisation could represent a major breakthrough by enabling the entire financial cycle to be integrated into a single digital infrastructure.
"Tokenisation falls into an entirely different category of innovation, which economists refer to as ‘general-purpose technology’. Rather than simply improving a particular element of a system, these technologies redefine the logic of the system as a whole”, he said at a conference on the 21st century financial system organised by Harvard Law School.
The success of these technologies will depend on coordinated adoption by all market players, stressed Mr Cipollone, who believes that central banks, through the Eurosystem, must create the conditions of trust necessary for tokenisation to take off by making a settlement asset available in central bank money and gradually integrating ‘DLT’ assets (see EUROPE 13842/6).
He has assigned to central banks the role of market architect, which is necessary to guide infrastructure choices, promote interoperability and prevent a European tokenised ecosystem from emerging in a fragmented form that is uncompetitive or dependent on non-European settlement assets. (Original version in French by Bernard Denuit)