Bank of Italy Proposes SEPA Modernization for Digital Assets

Bank of Italy Deputy Governor Chiara Scotti proposes upgrading SEPA to support tokenized deposits and programmable payments across Europe.

The initiative signals growing concern that existing payment infrastructure may fall behind the rapid development of private digital assets.

The proposal was presented by the Deputy Governor of the central bank, Chiara Scotti, during a speech focused on the “architecture of trust” in digital finance. According to her, the challenge is not simply implementing new technologies, but building a resilient structure that integrates both public and private forms of money.

Pressure to Modernize European Payments

At the heart of the proposal lies the fear that the rapid development of tokenized deposits and other digital instruments could lead to fragmentation within the financial system. Without a coordinated approach, different platforms and technologies could create isolated “islands” of liquidity, which would hinder the efficient functioning of markets.

The Bank of Italy emphasizes that modernizing SEPA (Single Euro Payments Area) is key to maintaining Europe’s technological competitiveness. Instead of creating entirely new payment rails, the idea is to upgrade existing infrastructure with capabilities for tokenization and programmability.

Architecture as a Strategic Priority

According to Chiara Scotti, the focus should be on the architectural design of future systems rather than just their technological advantages. This includes ensuring that new solutions can interact seamlessly with the traditional financial system and maintain the two-tier model, where central banks remain the ultimate source of trust.

This approach aims to prevent a scenario where private platforms dominate the payments scene without sufficient oversight, which could weaken the role of public institutions.

Connection to the Digital Euro and Future Markets

The initiative comes at a time when the ECB continues its work on developing a digital euro. The proposal to tokenize SEPA can be seen as a complementary element—an infrastructure layer that allows for a broader application of digital money in the real economy.

Potential benefits include faster cross-border payments, lower costs, and new applications in areas such as supply chain finance and securities trading. At the same time, the system will remain tied to regulated intermediaries, preserving control and stability.

Balance Between Innovation and Control

The Bank of Italy’s proposal reflects a broader trend among European institutions: a drive to implement innovation without compromising the stability of the financial system. In the face of increasing competition from global tech and financial players, Europe is trying to build its own model that combines efficiency with regulatory certainty.

If the initiative receives support at the EU level, it could lay the foundations for the next generation of payment infrastructure—one that combines the advantages of blockchain technology with the trust of the traditional banking system.