Germany Moving Away From CBDC, Creates Bridge Between Blockchain & Euro

  • Deutsche Bundesbank has tested a new blockchain-based system that allows investors to buy and sell securities on the blockchain with Euro.
  • The bank has claimed the technology can be scaled up to the entire Euro zone in a much shorter time than creating a digital euro.
A Deutsche Bundesbank branch in Dortmund, Germany

A Deutsche Bundesbank branch in Dortmund, Germany, 16 September 2020. Shutterstock

While other countries are focusing their efforts of researching Central Bank Digital Currencies (CBDCs), Germany has decided to bridge blockchain and traditional finance with a new project, Deutsche Bundesbank said in a press release on 24 March.

According to the announcement, Germany’s central bank partnered with Deutsche Börse and the German Finance Agency on a project to create a system that allowed those who sell securities on a blockchain to receive their proceeds directly into their bank accounts, without the need of digital currencies. The bank also said this technology can be scaled up to the entire Euro zone in a much shorter time than creating a digital euro. A member of the Bundesbank executive board, Burkhard Balz, 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.”

The new system uses two software modules — a “trigger chain” from Bundesbank and a transaction coordinator from Deutsche Börse — to connect the securities on the blockchain to the largest payment system in the Euro zone, TARGET2. In order to test the new system, the German Finance Agency issued a 10-year federal bond on a DLT system, which was then traded by six banks, namely Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Société Générale. Bundesbank said in its press release:

“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.”

While the German central bank is trying to create technologies to prevent the need of CBDCs — as stated by Balz in a speech in October 2020 — other countries are nearing the release of their own digital currencies. China, for example, has already developed its own CBDC wallet, and started onboarding private banks in its digital yuan trials, which have already progressed to real world tests.

Related Coverage
PBOC Official Says CBDC Must be Available in All Retail Scenarios
  • The head of China’s central bank digital currency institute said the e-CNY has undergone a major upgrade, and should be made available as an option in all retail scenarios.
  • The PBOC official noted that platforms can integrate the CBDC in the short term using QR codes, and focus on upgrading their payment tools in the long run.
September 4, 2023, 11:31 AM
Office building of the People's Bank of China

Office building of the People’s Bank of China. Flickr

DeSantis Launches Presidential Campaign, Vows to Protect Bitcoin
  • The current governor of Florida, Ron DeSantis, announced he is joining the race for the 47th president of the U.S. during a Twitter Spaces event on Wednesday.
  • During his speech DeSantis declared his support for Bitcoin and the wider crypto space, noting that if Joe Biden is re-elected “they’ll probably end up killing it”.
Russia to Launch Real Consumer CBDC Trials in April
  • Planned for 1 April, the CBDC trial will involve real consumers and real transactions, though they will be limited to a certain number of customers and transfers.
  • The pilot, however, will not be opened to the general public in its first phase, and will only be opened to customers chosen by the 13 participating local banks.