Deutsche Börse, Deutsche Bundesbank and Germany’s Finance Agency have developed and successfully tested a blockchain-based settlement interface for electronic securities which the bank claimed to have the potential to become a viable CBDC alternative.
- The test demonstrated that blockchain technology and conventional payment systems can work to settle securities in central bank money without relying on a CBDC.
- For demonstration purposes, the test had created a 10-year government bond issued using distributed ledger technology (DLT) with subsequent trading in primary and secondary markets settled in the same system.
- It then developed a “trigger solution,” and connected the DLT securities system with the eurosystem’s large-value payment system TARGET2.
- In this interface, a “trigger” is initiated when a transaction has been settled on the DLT system, signaling to TARGET2 that money can change hands.
DLT-based securities settlement
According to the Bundesbank, this process runs counter to blockchain-based settlement using a CBDC. Contrary to DLT-based settlement, this newly unveiled solution does not require assets and money to be tokenised. What has been created instead is an interface that connects the DLT platform with conventional payment systems and initiates (“triggers”) payment.
The announcement claimed 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 CBDC.
The project invovled a number of market participants, including Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Société Générale.
Blockbaster
Bundesbank and Deutsche Börse have teamed up with the Finance Agency to continue with the Blockbaster (blockchain-based settlement technology research) initiative that they started in 2016.
In previous project phases, the usefulness of blockchain technology in securities settlement and cash leg settlement of transactions was effectively demonstrated.
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