Bank of Italy Suggests EU Explore Tokenized SEPA Extension, Digital Euro Remains Top Priority

On May 4, 2026, Chiara Scotti, Deputy Governor of the Bank of Italy, proposed in a speech in Rome that the European Union should explore the possibility of a tokenized extension of the existing Single Euro Payments Area (SEPA) system.

Scotti noted that tokenization has become "relevant," and that European authorities should consider not only new instruments but also how existing payment arrangements could evolve in this direction. She argued that SEPA — with its scale, shared standards, and established interoperability — constitutes a distinctive European asset, and that a tokenized extension could become an important area for reflection.It should be noted, however, that Scotti's remarks used open-ended language such as "could become" and "should explore," and the proposal currently remains at the level of advocacy and suggestion, without a concrete implementation plan or timeline.

SEPA is a unified framework for cashless euro payments across the EU and several non-EU countries. According to the latest European Central Bank data, non-cash payment transactions in Europe totaled €116 trillion in the first half of 2025, up 2.9% year-on-year.Any technical overhaul of such a large-scale system would require careful consideration of compatibility with existing infrastructure, cost-effectiveness, and the coordination of diverse stakeholder interests.

Regarding the digital euro, Scotti stated explicitly that this is the area "where analytical work is most advanced." The ECB and the Eurosystem have thoroughly examined its implications across multiple policy dimensions, including monetary policy, financial stability, privacy, and inclusion.Earlier this month, the ECB signed agreements with three standard-setting organizations — European Card Payment Cooperation, Nexo Standards, and Berlin Group — to trial online payment processing for the digital euro.Nevertheless, the introduction of a central bank digital currency remains subject to full policy deliberation and legislative processes, and its final form and launch timeline are still uncertain.

Scotti adopted a more cautious tone regarding stablecoins and tokenized deposits. While acknowledging that these instruments may serve legitimate use cases, she noted that their broader implications for the monetary system are "less clear."The ECB has previously warned that widespread stablecoin adoption could accelerate deposit outflows, weaken banks' funding capacity, and potentially challenge the euro's monetary sovereignty.

In terms of the technical approach to tokenized payments, the Bank of Italy's proposal envisions a framework operating under regulated conditions, using commercial bank money or central bank money represented as digital tokens, rather than volatile cryptocurrencies.However, this technical path still requires further research and validation in areas such as security standards, system compatibility, and cross-border interoperability.

Scotti's remarks align with the ECB's previously published Appia roadmap and the upcoming Pontes distributed ledger settlement pilot, scheduled to launch in the third quarter of 2026.In March 2026, the ECB announced the launch of the Pontes project, which will enable central bank money settlement for DLT-based transactions starting in Q3 2026. The Eurosystem has also begun accepting tokenized assets as collateral in monetary policy operations.These developments indicate that tokenization, as one possible tool for financial infrastructure modernization, is receiving broader attention and careful assessment.

In summary, the Bank of Italy's proposal represents an open-ended reflection on the future evolution of Europe's payment systems, aimed at informing policy discussions at the EU level. The proposal touches on multiple complex issues — technical feasibility, regulatory frameworks, monetary sovereignty, and international competitiveness — and any actual implementation would require extensive consultation and in-depth study among EU member states, the ECB, and market participants.