Piero Cipollone, a member of the European Central Bank (ECB) Executive Board, recently made a compelling case for Europe to adopt digital assets and distributed ledger technology (DLT) to establish a cohesive capital markets union.
During his speech at the Bundesbank Symposium on the Future of Payments on October 7, Cipollone elaborated on the transformative potential of digital technologies in unifying Europe’s fragmented financial system, which can lead to cutting down costs associated with intermediation and enhancing market efficiency.
Understanding Fragmentation in Europe’s Financial Landscape
Cipollone emphasized that the existence of 35 diverse listing exchanges and 41 separate trading platforms contributes to a disjointed and inefficient financial environment. Although initiatives like the TARGET2-Securities platform have been launched to standardize securities settlements across Europe, inconsistencies in regulatory frameworks and legislative barriers remain significant obstacles to full integration.
He pointed out that without standardized rules regarding asset custody, taxation, and regulatory oversight, Europe cannot unlock the full potential of a unified capital market. This fragmentation ultimately makes European markets less competitive on a global scale, prompting a call for accelerated regulatory alignment among EU member states.
According to Cipollone:
“The lack of a unified supervision or a permanent safe asset has left Europe’s capital markets fragmented.”
Despite existing steps towards integration, Cipollone contended that a heightened commitment is essential, particularly in light of the growing importance of digital assets. The process of tokenization—issuing assets on distributed ledger technology—presents a unique opportunity to establish a more efficient financial system from the ground up.
The Potential of an Integrated Market
Tokenization has emerged as a significant catalyst for financial innovation, offering remarkable prospects for enhancing liquidity and lowering transaction costs. In contrast to traditional financial instruments, digital assets built on distributed ledgers function without a central database, operating instead on a synchronized network of decentralized traders.
According to Cipollone:
“This could mark the shift from centuries-old bookkeeping systems to a future of decentralized, real-time transactions.”
Cipollone also highlighted that over 60% of EU banks are exploring DLT solutions, with 22% already implementing these technologies. Nevertheless, he believes that the full potential of DLT has yet to be realized.
He urged public authorities to act decisively to advance the shift towards digital markets, ensuring that central bank money plays a pivotal role as a settlement asset throughout this transition. His vision includes the establishment of a European ledger—a common platform where digital assets, central bank money, and commercial bank currencies can coexist on interoperable systems.
This overarching ledger would empower financial institutions, central securities depositories (CSDs), and market participants to deliver services directly on a unified infrastructure, thereby lowering entry barriers and promoting capital market integration.
Cipollone also cautioned that failure to coordinate DLT adoption may exacerbate the current fragmentation, as individual nations and organizations may develop isolated systems. He called for enhanced collaboration among regulators, central banks, and market actors to ensure that Europe leads in the creation of a cohesive digital capital market.
In closing, Cipollone remarked:
“The transformative potential of tokenization goes beyond efficiency. By acting now, we can shape an integrated financial ecosystem that will serve Europe’s markets well into the digital future.”