The German Bundesbank has successfully tested a blockchain-based electronic securities settlement interface. Without depending on a central bank digital currency, the test crosses the gap between conventional finance and blockchain technology (CBDC).
The test, which was created in collaboration with the Deutsche Börse Group and the German Finance Agency, shows that the platform is based on two software modules that link the current payment system to digital ledger technology (DLT). The test issued a 10-year government bond using DLT, with trading in primary and secondary markets settled in the same scheme, to demonstrate the technology.
The test then created a “trigger signal” that linked the DLT to the current payment system, verifying that a transaction had occurred.
The platform then enabled the Bundesbank to reap the benefits of blockchain technology without having to restructure their currency. Germany has the biggest economy in the Eurozone. As a result, it’s important that the Bundesbank has been a vocal opponent of CBDCs.
The increasing popularity of digital currencies has piqued public interest in blockchain technologies and their potential applications. Blockchain is increasingly being used as a catch-all word for Bitcoin, the digital currency developed using the technology. Decentralized protocols’ capacity and breadth of implementation have already grown dramatically.
Burkhard Balz, a German politician and member of the Bundesbank board of directors, expressed similar sentiments, saying that the new technology could be applied more quickly in the Eurozone than CBDC proposals.
Following satisfactory testing, the Eurosystem should be able to introduce such a solution in a relatively short period of time — certainly much less time than is needed to issue central bank digital currency, for example.
Citibank, Barclays, Goldman Sachs, Commerzbank, DZ Bank, and Société Générale were among the companies involved in the project.
The Deutsche Bundesbank posted a video on Twitter that shows how digital transactions can be settled in secure and stable central bank money using existing infrastructure and distributed ledger technology.