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Blockchain in central banking: Where private stablecoin rails fit
Blockchain in central banking explained: how wholesale CBDCs, tokenized deposits and private stablecoins fit together, with real pilots and practical limits.
Blockchain in central banking is the use of distributed ledgers by central banks to settle central bank money between institutions, mostly in pilots for wholesale and cross-border payments. This guide covers what central banks are testing, how central bank money, tokenized deposits and private stablecoins differ, and where stablecoin rails fit. For how institutions settle with stablecoins today, see institutional settlement on Tempo.
A bank in Frankfurt that owes a bank in Singapore on a Friday evening has to wait for both domestic settlement systems to open and for correspondent banks to process the payment. Large-value systems such as the Fedwire Funds Service close on weekends and holidays, so a payment sent late on Friday often settles on Monday.
Central banks are testing distributed-ledger technology (DLT) to shorten that wait and to settle tokenized assets. The European Central Bank (ECB) and the Bank for International Settlements (BIS) both run programs in controlled settings, while live production deployments of wholesale central bank digital currencies (CBDCs) remain rare. Commercial banks and private stablecoin issuers are working on the layers above.
What is blockchain in central banking?
Blockchain in central banking is the use of a shared, programmable ledger to record and settle central bank money between banks and other eligible institutions.
Most of this work targets wholesale settlement, not consumer payments. The aim is a settlement layer where eligible institutions can transfer central bank money and tokenized assets on the same platform, with rules coded into the payment.
Wholesale CBDC vs. retail CBDC
The two terms are often confused, but they describe different instruments.
| Wholesale CBDC | Retail CBDC | |
|---|---|---|
| Who holds it | Banks and eligible institutions | The general public |
| Purpose | Interbank and securities settlement | Everyday payments |
| Replaces cash? | No | Partly, in some proposals |
| Current status | Pilots and experiments | Mostly research and pilots |
Wholesale CBDCs make existing central bank reserves programmable so they can move on DLT platforms. They do not change who can hold central bank money.
How central banks are testing DLT
Central bank projects keep the two-tier system. The central bank issues money to regulated institutions, and commercial banks keep serving businesses and consumers. DLT changes how money moves between those tiers, and each institution keeps its role.
Three programs show how this works in practice:
- Project Agorá. The BIS runs Project Agorá with eight central banks and more than 40 financial institutions. It tests whether central bank money and commercial bank deposits can settle together on one shared platform. In July 2026, its real-value testing covered 17 cross-border payment scenarios worth about 800,000 Swiss francs in total.
- Pontes. The ECB's Pontes initiative connects DLT platforms to the Eurosystem's TARGET settlement services, so transactions recorded on a ledger can settle in central bank money.
- Project Hangang. The Bank of Korea uses this pilot to run wholesale CBDCs and tokenized deposits together on a single ledger.
Some central banks are also exploring DLT for supervisory work, such as monitoring and sharing financial data.
Three layers of money on shared ledgers
Programmable payments involve three kinds of money. They work best as separate, complementary layers rather than competitors, because each carries a different claim and a different risk.
| Layer | Issuer | Claim on | Credit risk for holder | Hours |
|---|---|---|---|---|
| Central bank money | Central bank | Central bank | None | Set by the central bank system |
| Tokenized deposits | Commercial bank | Commercial bank | Bank risk, with deposit protections where they apply | Set by the bank |
| Private stablecoins | Private issuer | Issuer's reserves and legal terms | Issuer and reserve risk | 24/7 on public networks |
Central bank money
Central bank money sits at the base of the system. It carries no credit risk and acts as the legal anchor for settling private money.
Tokenized deposits
Tokenized deposits are ledger-based versions of commercial bank deposits. Banks can settle payments automatically while customer funds stay on the bank's balance sheet. The Clearing House launched its On-Chain Money Initiative to connect this kind of money with existing systems such as RTP and CHIPS.
Private stablecoins
Stablecoins sit outside bank balance sheets. They represent a claim on an issuer's reserve and legal arrangements, and they move on public networks. The differences between stablecoins and tokenized deposits matter for accounting, risk and who can hold each one.
Where private stablecoin rails fit in institutional payments
Stablecoin rails complement central bank and commercial bank infrastructure rather than replace it. Their main difference is operating hours: stablecoin transfers run 24 hours a day, seven days a week, including weekends when large-value systems are closed.
That affects prefunding. In correspondent banking, institutions often hold cash in foreign accounts in advance so payments can be paid out locally. With stablecoins, funds can be sent when a payment is due and converted to local currency at the destination, which can reduce the cash held abroad.
Stablecoin rails also carry real limits:
- Ramps follow banking hours. Converting between stablecoins and local currency depends on on-ramp and off-ramp partners, who rely on local banks and their cutoffs.
- Local rules still apply. Capital controls, licensing and reporting rules in each country govern who can hold, send and redeem stablecoins.
- Settlement in central bank money is separate. A stablecoin transfer settles on its network, but banks still settle with each other in central bank money.
- Liquidity varies by currency. Most stablecoin liquidity is in US dollars, with thinner markets for other currencies.
How institutions can prepare
Banks and payment companies can work with all three layers without waiting for central bank pilots to reach production. A practical sequence looks like this:
- Map current settlement delays. Identify the corridors where weekend gaps, cutoffs or prefunded accounts cost the most.
- Track central bank programs. Follow pilots in your markets, such as Agorá, Pontes or national projects, for timelines and access rules.
- Keep compliance where it is. Run KYC, AML and sanctions screening in existing systems, and treat the onchain transfer as the settlement leg.
- Plan reconciliation. Make sure onchain payments carry references that match invoices and bank messages.
- Test one corridor. Start with a single route, confirm ramp partners and local rules, and measure time to usable funds and total cost.
Where Tempo fits
Tempo is a payments-focused blockchain for stablecoin settlement that works alongside existing bank messaging and compliance systems.
- Settlement in under a second. Stablecoin transfers settle onchain in under a second, with network fees payable in stablecoins or sponsored by the sender.
- Reconciliation data. Transfer memos carry a reference, such as an invoice number, with each payment and can link to offchain records, including ISO 20022 messages, through integration logic.
- Privacy for institutions. Tempo Zones, in limited access, keep balances and activity inside a Zone private from the public while the Zone operator keeps visibility for audit and compliance.
- Existing messaging stays in place. Coastal is building a cross-border corridor on Tempo that keeps its partner banks' KYC/AML screening and payment instructions while the settlement leg moves to stablecoins.
Customers remain responsible for compliance, ramp and banking partners, and the licenses each market requires. Talk to the team about stablecoin settlement for your institution.
Frequently asked questionsWhat is blockchain in central banking?
It is the use of distributed ledgers by central banks, mostly to test wholesale settlement of central bank money between banks and other eligible institutions. Most projects are pilots rather than live production systems.
What is the difference between a wholesale and a retail CBDC?
A wholesale CBDC is a digital form of central bank reserves that only eligible institutions can hold. A retail CBDC would be available to the public, and most current central bank DLT work focuses on the wholesale version.
Are tokenized deposits the same as central bank money?
No. A tokenized deposit is a claim on a commercial bank, recorded on a ledger. Central bank money is a direct claim on the central bank and carries no credit risk for the holder.
Where do private stablecoins fit next to central bank infrastructure?
Private stablecoins act as a complementary payment rail that runs 24/7 on public networks. Final settlement between banks still happens in central bank money, and stablecoins depend on banks and ramps to move in and out of local currency.
Do stablecoins remove the need for prefunding?
They can reduce it, because funds can be sent when a payment is due instead of sitting in foreign accounts. Conversion to local currency still depends on ramp partners, local banking hours and local rules.
What are central banks mostly not building?
Central banks are mostly not building retail CBDCs or replacing commercial banks with blockchain networks. Most projects keep the two-tier system and apply DLT to wholesale settlement.