The Bank of Italy is pushing the European Union to explore tokenization of SEPA payments as a way to keep the euro competitive in digital finance. The call comes as the European Central Bank runs its own pilot projects using distributed ledger technology.
The push for tokenized payments
Tokenization would turn traditional payment orders into digital tokens that move faster and settle almost instantly. The Bank of Italy argues that without such a move, the euro risks losing ground to other digital currencies and payment systems being developed outside the bloc. SEPA — the Single Euro Payments Area — already lets people and businesses make cashless payments across 36 countries. Adding a tokenized layer could make those transfers even more efficient, the bank says.
The central bank's stance is a clear signal to Brussels: if Europe wants the euro to stay a dominant global currency in the digital age, it needs to update the plumbing behind everyday payments. That means moving beyond conventional systems and into the world of programmable money and smart contracts.
ECB's parallel DLT experiments
The European Central Bank hasn't waited for a formal EU policy. It is already running several trials that test distributed ledger technology for settlement and wholesale payments. Those pilots aim to see whether DLT can handle the speed, security and scale required for central bank money and large-value transactions.
The Bank of Italy's endorsement fits neatly alongside those efforts. But where the ECB's experiments focus on interbank and wholesale use, the Italian central bank wants the EU to think bigger — retail payments, consumer transfers, the whole SEPA ecosystem. Tokenization, in its view, isn't just for banks moving money between themselves. It's for the person buying coffee in Milan or the freelancer invoicing a client in Berlin.
What SEPA tokenization would change
SEPA already processes billions of transactions a year. Tokenizing those payments could cut settlement times from hours to seconds, reduce fraud risks through programmable conditions, and open the door to automated micropayments. A tokenized euro could also interact more easily with blockchain-based platforms for trade finance, supply chains or digital identity.
But adoption isn't automatic. The EU would need to update its payment rules, harmonize legal frameworks across member states, and ensure that tokenized payments remain as safe as the current system. The Bank of Italy's push is a political nudge as much as a technical proposal — a reminder that digital currency competition isn't waiting for Europe to catch up.
China has its digital yuan. The U.S. Federal Reserve is studying a digital dollar. Private stablecoins like USDC and USDT already move billions daily. The Bank of Italy wants Europe to move beyond studying and into building.
Whether the European Commission takes up the suggestion — and how quickly — remains an open question. The ECB's pilots will produce results in the coming months, and those findings could shape the next steps. For now, the message from Rome is clear: tokenize SEPA, or risk watching the euro's digital future slip away.
