The European Central Bank is sharpening its message to commercial banks: in a fully digital economy, issuing traditional account money will no longer be enough. According to Fabio Panetta, commercial bank money will need to become fully digital and tokenised, evolving alongside a future digital euro to remain relevant and to anchor Europe’s monetary system.
Speaking in Milan to Italy’s banking association, Panetta argued that both central bank money and private bank money will continue to form the backbone of the financial system, but only if they adapt to a world where assets and payments increasingly exist in digital, token-based form. His remarks were reported by Reuters on January 21 and reflect a more explicit stance than the ECB has previously taken in public.
Panetta said the growing tokenisation of financial assets has reopened fundamental questions about the two-tier monetary system, which links central bank money with privately issued bank deposits. Some critics have warned that the spread of stablecoins could undermine the principle that all money trades at par, regardless of who issues it. Panetta rejected that view, insisting that only central bank money and commercial bank money can serve as stable anchors.
Stablecoins, he said, are inherently dependent on those anchors. While their use is likely to grow, particularly because of political support in the United States to reinforce global demand for the dollar, they will not replace traditional forms of money. “It’s not clear what role they’ll have,” Panetta said, according to Reuters, but the system will remain centred on central and commercial bank money, both of which will need to become digital.
Digital euro as strategic infrastructure
Panetta explicitly linked this transformation to the ECB’s digital euro project, which he said is intended to keep central bank money relevant in an increasingly digital economy and to protect Europe’s monetary sovereignty. The ECB currently aims to be ready to launch a digital euro around 2029, subject to legislation and political approval.
As a former ECB executive board member, Panetta previously oversaw the digital euro project. In Milan, he revisited a core argument behind it: Europe’s heavy reliance on non-European payment firms. More than two-thirds of digital payments in the euro area depend on US-based providers such as Visa, Mastercard and PayPal.
Recent geopolitical tensions, he said, underline the risks of that dependence. In this context, the digital euro is not presented as a niche retail product, but as a piece of public infrastructure designed to ensure European control over payments.
Panetta also addressed concerns from banks, particularly in Germany, which fear that a digital euro could siphon off deposits or payments revenue. He dismissed those fears as misplaced. Recalling a discussion with banks in a large European country, he said they were worried about losing 30 percent of the payments they still handle digitally. “Instead of worrying about the 30 percent,” he said, “think about who controls the 70 percent you’ve already lost.”
Implications for European banks
Perhaps the most significant signal in Panetta’s remarks is that commercial banks are no longer treated as passive distributors of public digital money. By saying that private bank money itself will become mostly tokenised, he implies that banks will need to modernise their own liabilities, not just integrate a digital euro into existing systems.
Tokenisation, in this context, refers to representing money and other financial assets as digital tokens, potentially on distributed ledger technologies. For banks, this could reshape everything from settlement and liquidity management to how payments interact with programmable finance.
For policymakers, Panetta’s comments underline a clear direction of travel. The ECB now appears committed to a future in which public and private digital money coexist, but only if both are redesigned for a digital-first financial system. Resistance from banks may influence the pace and details, but not the destination.
Related: ECB Outlines Core Design Features for the Digital Euro in New Technical Annex