Piero Cipollone, a member of the European Central Bank’s (ECB) Executive Board, spoke at the Bundesbank Symposium about the potential for creating an integrated European capital market for digital assets. Cipollone stressed on the role of digital technology in the modernization of Europe’s financial structures, with the focus on digital assets and blockchain technology.
Cipollone Advocates Tokenization and DLT for Europe’s Financial Future
He said that as far as the fundamentals of finance are concerned such as ‘double entry’ system, was developed by Italian accountants in the fourteenth century. All these principles apply to today’s markets, which are sophisticated and expensive. In Europe the fragmentation of financial systems is due to differences in the national laws.
According to Cipollone, digitization is the future of the European financial markets. In this case, tokenization and DLT can facilitate processes, cut costs and enhance market efficiency. Tokenization, therefore, disentangles assets from centralized systems and makes the transactions more efficient and more transparent. He said this could help in the creation of a single market in Europe for the trade in these digital assets.
Moreover, Cipollone also cautioned about threats. In case countries fail to cooperate, the digital markets can become fragmented. Central banks have to make sure that digital transactions are settled with a safe and risk-free central bank money.
ECB Urges Early Cooperation for Digital Capital Markets in Europe
To counter these risks, Cipollone urged central banks, regulators and financial institutions to start cooperating at an early stage. He proposed to establish a “European ledger” or a common base for the assets that define the digital environment, so that everyone could engage with each other.
Lastly, The ECB executive underscored that Europe has a chance to develop and build a genuine digital capital markets union. In this process, central banks have a critical responsibility to facilitate this shift while maintaining the stability of the financial system and embracing innovation.
