Italy's central bank deputy governor backs exploration of tokenized SEPA payments as European regulators weigh blockchain-based settlement systems. The proposal targets a potential gap between traditional banking infrastructure and emerging digital payment rails.

Luigi Federico Signorini, Bank of Italy deputy governor, called for Europe to evaluate whether tokenizing SEPA (Single Euro Payments Area) transfers makes sense. SEPA currently processes cross-border euro transactions across 36 countries but remains tethered to traditional banking rails. Tokenization would move settlement onto distributed ledgers, potentially reducing friction and custody risks.

The push reflects broader ECB strategy. The central bank has run multiple digital euro experiments since 2023, including Project Orus, which tested tokenized settlement on blockchain infrastructure. The ECB's tokenization focus directly counters stablecoin adoption. By building official digital payment tokens before private stablecoins dominate, regulators aim to maintain monetary control and prevent non-bank entities from capturing payment settlement.

Signorini's comments signal Italy aligns with this playbook. Rather than ban tokenized payments outright, European officials explore co-opting the technology for official monetary purposes. This approach echoes MiCA (Markets in Crypto-Assets Regulation), which permits stablecoins under strict conditions while positioning CBDCs as the preferred settlement layer.

Technical barriers remain. SEPA processes 2 billion transactions annually. Moving that volume to public or semi-public blockchains requires proving scalability without sacrificing speed or cost efficiency. The ECB's experimental tokenized systems use private permissioned networks, a compromise that surrenders blockchain's decentralization promise but gains regulatory control.

Market implications cut both ways. Success in tokenized SEPA settlements could cannibalize demand for bridge assets and cross-chain protocols that currently capture remittance flows. However, official tokenization also legitimizes blockchain infrastructure within financial institutions, potentially accelerating enterprise adoption of crypto-adjacent technologies.

The proposal remains early stage. No timeline exists for implementation. But Italy's formal endorsement signals Europe's top economies view tokenization not as a threat requiring prohibition