Bank of Italy Urges European Union to Expand Tokenized SEPA Payment Systems

On May 4, 2026, Chiara Scotti, Deputy Governor of the Bank of Italy, sent a significant signal shifting the narrative of European digital finance. She urged the European Union to explore a tokenized expansion of the Single Euro Payments Area (SEPA). This represents a strategic shift toward modernizing proven existing infrastructure rather than focusing solely on developing new digital tools.

As tokenization becomes increasingly important, Europe must pay attention not only to new tools but also to how existing payment methods can evolve. From this perspective, the tokenized expansion of SEPA could be a significant area of reflection based on Europe's distinctive assets.

Deputy Governor Scotti argued that the 'architecture of trust' already inherent in SEPA provides a unique foundation for next-generation programmable payments. Her proposal reflects the Eurosystem's commitment to maintaining the stability of the existing financial system while embracing the efficiency of Distributed Ledger Technology (DLT).

A New Vision and Strategic Shift for European Payments

The Bank of Italy's proposal prioritizes the evolution of existing assets over infrastructure innovation. SEPA is established as a trusted payment standard across Europe, and tokenizing it is expected to bridge the gap between traditional banking and decentralized finance (DeFi). This is evaluated as a cost-effective and rapid response strategy compared to building an entirely new digital currency.

• Completion of the transition from unstructured address formats to structured formats by November 15, 2026
• Introduction of unified reporting templates for Payment Service Providers (PSPs) under SEPA regulations
• Establishment of a framework for accepting and managing collateral assets based on Distributed Ledger Technology (DLT)
• Alignment of digital assets and monetary policy transmission channels within the Eurosystem

The rapid growth of the tokenized financial market supports the economic rationale for these proposals. As of February 2026, the global tokenized finance market size reached approximately €38 billion, a more than five-fold increase from €7.4 billion in early 2024. Strong growth in Money Market Funds (MMFs) and bonds, in particular, is driving market changes.

Piero Cipollone, a member of the Executive Board of the European Central Bank (ECB), also assessed that the benefits of tokenization are incomparably greater than previous technological changes. In a speech in April 2026, he emphasized that tokenization is an opportunity to accelerate the integration of European capital markets. In this context, the Bank of Italy's proposal aligns with Europe's digital roadmap.

Establishing the Relationship Between the Digital Euro and Stablecoins

Tokenized SEPA is likely to act as a complement or bridge rather than a direct competitor to the digital euro. Tokenized SEPA payments operating within a regulated environment could provide a safer alternative to private stablecoins. This enhances financial stability by allowing users to enjoy the efficiency of DLT while using a safe means of payment under central bank supervision.

Furthermore, the Eurosystem's start in March 2026 of accepting DLT-based collateral for credit operations through Target2-Securities suggests that technical preparations are well underway. On this infrastructural foundation, the expansion of SEPA is expected to be a key element in completing the European digital financial ecosystem.

Future Outlook: The November 2026 Milestone

The most important point for market participants to watch during the remainder of 2026 is November 15. This date is the deadline for SEPA technical updates, after which the use of unstructured address formats will no longer be permitted. The success of this technical transition will be a litmus test for whether European payment systems are ready to accommodate more complex tokenization features.

If the Bank of Italy's proposal is materialized into actual policy, Europe will take its own path of absorbing the advantages of blockchain technology while preserving existing financial infrastructure. This is interpreted as a strategic move for Europe to achieve both trust and innovation in the global digital finance competition.