Lagarde: ECB to build single European tokenized financial market

European Central Bank (ECB) President Christine Lagarde announced plans to build a single, pan-European tokenized financial market, warning that the sector could face fragmentation if not settled with central bank money. Speaking at an ECB conference on June 15, Lagarde said she had gathered opinions from over 60 industry stakeholders, many of whom believe settlement in central bank money is a prerequisite for large-scale digital asset issuance. She argued that without a reliable, risk-free settlement asset, the tokenized finance market could become disjointed. Lagarde also pointed out that tokens backed one-to-one with the euro cannot adjust their supply to meet market demand, rendering them unable to provide liquidity during a systemic crisis. Lagarde added that the ECB plans to pursue settling tokenized transactions with central bank money through its Pontes project this year and will develop a blueprint for a single European tokenized financial market through its Appia project.