Germany Approves Strategy for Exploring Valuable Blockchain Use Cases

The strategy was already approved by Chancellor Angela Merkel on Wednesday and outlines Germany’s priorities in the blockchain world, such as securities, corporate finance and even digital identity. On the other hand, the government will not tolerate the threat of stablecoins such as the upcoming Libra by Facebook.

This program came out after extensive talks with the business which started this spring. These consultations engaged 158 professionals and company representatives and finished with an outcome of 6,261 responses. The main idea of the approach is towards open-source software and that the state should be the absolute arbiter in such tremendous tech competition.

Further exploration needed

According to the strategy Germany will extensively explore the use of blockchain for digital identity purposes. It is actually the government which will launch an initial project for a blockchain-based digital identity that aims to study concrete benefits in various use cases such as document registration, managing the record of civil status, ID cards and passports. This should happen in the near future but a specific time frame is yet to be announced. As the document states:


“It will examine whether these blockchain-based digital identities provide clear added value compared to existing solutions and whether they can be designed in such a way that they comply with legal data protection requirements.”

The survey showed that German citizens trust the state as the citizens’ personal information protector. Other insights from the document include:

“It has also become clear that the state is seen as the central organizer or regulator of digital personal identities. The state is under an obligation to guarantee data protection and security in regulatory terms.”

There were some efforts from enterprises towards blockchain identity solutions like the recent one by Microsoft that is using Bitcoin’s ledger. Nevertheless, no project has a large-enough role in the market and this is why the German government wants to try out the possible solutions and let them compete for the privilege to serve the German people.

Smart contracts

The field of Internet of Things is another important topic in Germany’s digital strategy. They intend to listen research proposals involving verification for autonomous gadgets and digital identification. As per the strategy:

“In particular, blockchain technology, embedded SIM/embedded Universal Integrated Circuit Card, multi-factor authentication and other hardware and software procedures are to be considered.”

The usage of smart contracts is also set for maintaining certain ISOs and certifications but the technology has to be applied in a way that is understandable even for the ordinary user:

“The technical layman cannot comprehend what the Smart Contract actually technically implements. This leads to the demand that Smart Contracts should be combined with an obligation to provide information.”

What is important is that the whole strategy embraces the use of open-source software that should eventually boost the interoperability of the tech solutions yet to come. Furthermore:

“The Federal Government is committed to ensuring that application solutions for blockchain have interoperable and open interfaces for linking with other (blockchain) applications.”

The program includes information on Germany’s plan to regulate distributed ledger tech (DLT)-based securities, which was also noted by Ministry of Finance:

“If securities were now issued on a blockchain, the execution and settlement of securities transactions could … be carried out more cost-effectively and more quickly than has been the case to date.”

Be the end of the year we should see a “technology-neutral” draft law on digital securities as stated in the document.

Stablecoin policy

The strategy does not include any concrete cryptocurrency name but it is clear that the state will not allow any stablecoin to dominate in the country or in the European Union. As the document reads:

“In principle, there is a regulatory regime for stablecoins in the European Union. At the European and international level, the Federal Government will work to ensure that stablecoins do not become an alternative to state currencies.”

One might think that this is prompted by Facebook’s Libra project as Germany and France made a joint announcement covering their distrust in Libra for preventing terrorism financing and money laundering. One of the most important topics in the strategy is that Germany is expected to stay at the top of all jurisdictions used by investors and innovators.

Thomas Heilmann, member of the German parliament and the leading advocate of these blockchain/cryptocurrency policies stated that he expects Germany to be a convenient place to carry out DLT-related projects:

“The home of the emerging token economy will be in Germany, just as Silicon Valley became a hotspot for previous innovations.”