Bundesbank pilots securities settlement via blockchain

Among the participants involved in the experiment include Commerzbank, Citibank, DZ Bank, Barclays, Société Générale, and Goldman Sachs

Bundesbank

Bundesbank pilots securities settlement via blockchain. Source: pixabay.com

Deutsche Bundesbank, Deutsche Börse, and Germany’s Finance Agency have established a distributed ledger technology (DLT). The 3 parties developed and analyzed the electronic securities settlement interface in collaboration with other market players.

The security settlement enabled by the DLT technology is carried out with the help of a trigger solution and a transaction coordinator in TARGET2, which is a large-vague remittance system in the Eurosystem.

The development has confirmed the prospect of establishing a technological bridge between normal remittance systems and blockchain technology. This would make settling securities in central bank money a possibility without the need to have a central bank digital currency.

Following successful testing, the Eurosystem should be able to implement such a solution in a relatively short space of time – at least in far less time than it would take to issue central bank digital currency, for instance
Burkhard Balz, member of the Bundesbank Executive Board responsible for the Directorate General Payments and Settlement Systems

During the testing phase, the Federal Government’s Finance Agency announced a 10-year federal bond in the DLT system. During the phase, secondary as well as primary transactions will be settled via DLT. However, transactions undertaken during testing will not be legally binding.

Money and assets are tokenized in the DLT-based settlement system. This means that they are represented as digital tokens. However, the new solution does not require tokenized money.

We’ve reported that Japan’s first digital bank to start operations this May.

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