Deutsche Börse, Deutsche Bundesbank and Germany’s Finance Agency have developed and successfully tested a settlement interface for electronic securities, working with a range of other market participants. The market participants involved in conducting the experiment were Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Société Générale.
Securities settlement using distributed ledger technology (DLT) is performed with the aid of a “trigger” solution and a transaction coordinator in TARGET2, the Eurosystem’s large-value payment system. In doing so, the participants have demonstrated that it is possible to establish a technological bridge between blockchain technology and conventional payment systems to settle securities in central bank money with no need to create central bank digital currency.
During testing, Germany’s Finance Agency issued a ten-year Federal bond (Bund) in the DLT system, with primary and secondary market transactions also being settled using DLT. The transactions carried out during testing are not legally binding.
Burkhard Balz, member of the Bundesbank Executive Board responsible for the Directorate General Payments and Settlement Systems, said in a statement: “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.”
Stephan Leithner, member of the Executive Board of Deutsche Börse, said in a statement: “New technologies are a key component in creating infrastructures of tomorrow that meet the markets’ needs. This project marks a major step towards more efficient securities settlement and securities digitalization by combining new technologies with existing infrastructures in a smart way.”