Germany’s central bank, the Deutsche Bundesbank, has successfully tested a settlement interface for electronic securities using the distributed ledger technology (DLT).
A statement from the bank indicates that the test was carried out in conjunction with the Deutsche Börse Group and the German Finance Agency.
According to the bank, the test shows that it is possible to bridge the traditional finance infrastructure with blockchain technology without deploying a central bank digital currency (CDBC).
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In the test course, the Federal Government’s Finance Agency issued a ten-year Federal bond through the DLT trigger system. Furthermore, the agency claims it also tested securities trading on primary and secondary markets.
The testing attracted participants from Citibank, Barclays, Goldman Sachs, Commerzbank, DZ Bank and Société Générale.
Bundesbank adds that the system depends on two software modules that link its internal system and distributed ledger technology. As opposed to setting up a token-based system, Bundesbank created an interface that initiates a transaction settlement trigger.
Bundesbank Executive Board member in charge of Directorate General Payments and Settlement Systems Burkhard Balz said:
“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.”
Germany’s unsupportive stand on CBDCs
Germany’s move comes as most countries continue to explore the idea of CBDCs and their viability in the financial system.
The bank adds that the new solution could easily be replicable and scalable in a short period unlike the length of time it takes to issue a CBDC.
Interestingly, the Bundesbank has not been supportive of the idea to launch a digital euro, unlike other EU counterparts. The bank argues that a digital euro would destabilize the banking system and penalize savers.
Furthermore, the European Central Bank has been actively exploring the idea of a digital Euro. The facility has even made attempts to convince the Germany central bank on the merits of a digital euro.
