Bank of Italy Flags Tokenized SEPA for EU Payments

• EU may explore tokenized SEPA to align payments with digital finance trends and infrastructure shifts.
• Bank of Italy highlights trust and regulation as core to money despite tech-driven payment changes.
• ECB digital euro and tokenized SEPA seen as tools to maintain control amid private money growth.

The Bank of Italy has pointed out that the European Union may need to assess the development of a tokenized version of its existing payments framework, signaling a possible shift in how digital transactions are structured across the region.

The proposal centers on adapting the Single Euro Payments Area (SEPA) to align with ongoing technological changes, particularly as digital forms of money and distributed ledger systems become more prominent in financial infrastructure.

Speaking on the issue, Deputy Governor Chiara Scotti highlighted that innovation in financial systems is prompting renewed scrutiny of central banks’ roles in maintaining monetary stability. She noted that while emerging technologies enable faster and more programmable transactions, these features relate to how payments function rather than what gives money its value.

Scotti stated that trust remains the defining characteristic of money, supported by regulated institutions and regulatory frameworks. Her remarks raise concerns that technological advancements alone do not redefine monetary fundamentals, even as digital payment tools evolve.

Pressure From Private Digital Money

The discussion comes as financial innovation introduces new forms of privately issued digital money, including electronic money tokens and tokenized bank deposits recorded on distributed ledgers. According to the Bank of Italy, these developments could reduce the reliance on traditional banking systems by offering alternative mechanisms for storing and transferring value.

Such changes raise questions about how central banks can uphold oversight of monetary systems while accommodating innovation. Scotti indicated that ensuring compatibility between public and private forms of money is becoming a key priority for policymakers.

SEPA and Digital Euro in Focus

The EU’s payment infrastructure has changed since the introduction of the euro, with SEPA enabling uniform cashless transactions across participating countries. However, Scotti suggested that the next phase of development may involve integrating tokenization into this framework.

At the same time, the European Central Bank (ECB) continues to work on the digital euro project, overseen in part by Executive Board member Piero Cipollone. The program aims to maintain the relevance of central bank money in an increasingly digital economy.

Scotti concluded that, alongside the digital euro, exploring a tokenized extension of SEPA could represent a logical step in adapting Europe’s payment systems to ongoing technological shifts while preserving monetary control.

Related: UK Advances Major Reform for Digital Payments Growth