German Bundesbank tested blockchain-based settlement interface for electronic securities. The test shows that new technologies and traditional payment systems can work to settle securities in central bank money without relying on central bank digital currency (CBDC).
Together with Deutsche Börse and German Finance Energy, the Bundesbank announced on Wednesday that, for demonstration purposes, the test generated 10-year government bonds issued using distributed ledger technology (DLT), followed by trading in the primary and secondary markets , settlements for which are carried out in the same system.
He then developed a “trigger solution” and connected the DLT securities system with the major payment system eurosystem TARGET2. In this interface, a “trigger” is initiated when a transaction has been settled in the DLT system, signaling to TARGET2 that money can change hands.
A number of market participants took part in the project, including Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Société Générale.
CBDC debate in Eurozone
According to the Bundesbank, this process conflicts with blockchain-based calculations using CBDC, which will tokenize assets and money.
The statement claimed that this solution can be replicated and scaled up in a short amount of time compared to the time it would take to release the CBDC.
Unlike its counterparts in other countries such as France and the Netherlands, the Bundesbank was rather reluctant to launch the digital euro, arguing that it would destabilize the banking system and punish depositors.
This is important as it can be assumed that the Bundesbank will have a significant influence in the negotiations on the development of the digital euro, since the German economy is the largest in the eurozone.
The European Central Bank (ECB) has tried to convince Germany's central bank of the merits of the digital euro, and officials said Thursday that such a currency will be designed to ensure it will not compete with bank deposits.