Applications and Use Cases

German Federal Bank Uses Blockchain and Distributed Ledger Without Digital Currency


April 21, 2021

Germany's federal bank has concluded successful tests of a blockchain-based settlement interface for electronic securities. The testing was developed through a partnership with Deutsche Borse Group and the German Finance Agency.

The technology marks a major milestone for blockchain and banking, demonstrating successful use of the technology for mainstream financial transactions without the need for a central bank digital currency (CBDC). The testing revealed the blockchain platform uses two software modules to connect the federal Bundesbank's existing payment system with digital ledger technology (DLT).

The bank issued a 10-year government bond using DLT and also traded in primary and secondary markets settled in the same system. A trigger signal was then developed within the test that connected the DLT with the current payment system and confirmed that a transaction had taken place.

Use of the blockchain platform will enable Bundesbank to reap the benefits of blockchain and distributed ledger technology without the need to overhaul its currency. That is a significant leap since Bundesbank has been a strong opponent of CBDCs. Blockchain is commonly associated with Bitcoin and other digital currencies, but the testing proves the technology has myriad applications beyond cryptocurrency.

“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,” said Burkhard Balz, a member of the Bundesbank board and German politician. He added that the new technology has the potential to be more rapidly adopted within the Eurozone than CBDC proposals.

Several additional major global financial players also participated in the blockchain project, including Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Societe Generale.

Bundesbank also made a video available on Twitter demonstrating that digital transactions may be settled using safe and stable central bank currency by leveraging DLT with the existing finance infrastructure.




Edited by Maurice Nagle

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