Frankfurt banks announce successful Blockchain settlement trial

March 7, 2019, | AtoZ Markets – Another test on incorporating the blockchain technology into the German market has been recently carried out.

Both of Deutsche Boerse AG and Commerzbank put together considerable effort for measuring the outcome of recruiting the blockchain technology in automating the securities settlement process.

The test-transaction the financial giants worked on included as well executing legally-binding settlement of a repo trade benefiting from a distributed ledger, which is the basic pillar that supports Bitcoin.

“For the transaction, digital tokens were generated for both commercial bank money (cash tokens) and securities (securities tokens). Distributed ledger technology was then used to execute the simultaneous swap of the tokens as a legally binding transaction. Deutsche Börse acted as the cash provider, Commerzbank as the borrower and main incubator, Commerzbank’s research and development unit, acted as the blockchain platform operator. The technology used and the underlying legal concept were developed jointly by the partners.” Said the Commerzbank in a press release on its website.

The results of the tests showed that distributed ledger can greatly help in proof of concept in the payment and securities settlement system.


Blockchain is proving its efficiency, toward a broader use in the future

based on the principle of "delivery versus payment", the blockchain technology provides a better settlement process, as the previous models proved that using this technology will also support the flexibility of the financial system, especially in periods of stress, through faster settlement times and reducing settlement risks and the overall cost of securities transactions.

Among the other benefits, the joint statement referred to “immediate and simultaneous conversion of assets, settlement of transactions in real time as well as reduction of counterparty risk and capital costs.”

Jens Hachmeister, Head of DLT, Crypto Assets and New Market Structures at Deutsche Börse, commented on the successful test, saying “The successful execution as part of the joint project motivates us to explore the efficiency of distributed ledger technology further. Our particular focus here is on the integrated payment function – cash on ledger – which we have successfully demonstrated. The development of different blockchain applications and setting new standards is a high priority for Deutsche Börse Group, and we will push ahead with this process in close exchange with partners, supervisory authorities and central banks”

The German plans seem to be looking at further future expansion on using the blockchain technology in various application in the financial market especially, hinting that “The next steps are linked closely to the creation of underlying legal conditions which are a requirement for a binding assessment of contractual relationships. The parties involved see themselves as trailblazers in this young technology and seek to create cornerstones for the financial market infrastructure.”, as per the bank's press release.

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