The central bank keeps the settlement anchor
Isabel Schnabel, a member of the European Central Bank's Executive Board, argues that on-chain wholesale finance needs a safe ultimate settlement asset. Central-bank reserves sit outside the private credit chain, while stablecoin issuers cannot expand liquidity elastically under market stress. Her proposal is to issue reserves directly on programmable ledgers.[1]
When Project Pontes launches next month, it will provide a synchronisation mechanism linking market distributed ledgers to TARGET Services. Legal finality for the cash leg will initially remain in TARGET2 and later move to the Eurosystem-operated distributed-ledger platform. Smart contracts and round-the-clock operation are also reserved for later stages. The transition aims to make the safe settlement asset programmable without placing it on a private intermediary's balance sheet.[1]
Choosing between efficiency and fault isolation
When reserves and the asset being bought sit on the same ledger, both transfers can be validated as one transaction under the same consensus mechanism. A unified ledger maximises that atomic-settlement efficiency. Its cost appears in governance: liability for a smart-contract failure, admission of participants, software upgrades and confidentiality rules converge on one critical infrastructure. Schnabel also notes that a unified ledger processing millions of transactions could become a bottleneck and create technology lock-in.[1]
Several specialised ledgers can distribute the workload and contain a failure within one domain. In return, liquidity fragments when reserves cannot move seamlessly to where they are needed, making collateral allocation less efficient and potentially raising demand for reserves. Pontes therefore faces a two-part resilience test: can reserves keep moving under stress, and can a software failure be isolated before it crosses into other ledgers? Strong interoperability and clear liability rules could buffer both channels.[1]