For years, stablecoins have answered crypto’s biggest question: how do you move traditional money on-chain? USDC and USDT created digital dollars that can move across blockchain networks 24/7.
But this week, the European Central Bank took a different approach.
The ECB launched Pontes, connecting its traditional payment infrastructure directly with blockchain based financial markets.
It means eligible institutions can settle certain tokenised transactions using central bank Euros rather than relying on a privately issued stablecoins as the cash side of the trade.
Think about a €10 million tokenised bond.
The bond may already exist on blockchain infrastructure, but something still needs to settle the €10 million payment. Pontes creates a route for that payment to be made using central bank money.
It shows that blockchain isn’t necessarily developing as a financial system separate from traditional finance. Increasingly, the infrastructure of the two is being connected.
But this doesn’t make stablecoins less important.
Stablecoins can move globally, operate around the clock, sit inside self custody wallets and interact directly with public blockchain applications. Pontes is currently designed for wholesale financial institutions and operates within defined hours. The ECB plans to expand its functionality over time.
What we could therefore be heading towards isn’t one form of digital money replacing another. It could be several forms existing alongside each other:
- Central-bank money.
- Tokenised bank deposits.
- Stablecoins.
All moving through increasingly blockchain based financial infrastructure.
Crypto spent years trying to put traditional money on the blockchain. Now central banks are starting to bring their own money to the blockchain instead.
The interesting question is no longer simply whether money moves on-chain. It’s what kind of money we choose to use once it gets there.