Dutch Financial Giants Partner to Test Blockchain Solutions for Securities Settlements

Deutsche Bundesbank and Deutsche Börse recently announced they were joining forces to test blockchain-based solutions for securities settlement based on blockchain technology, as noted on a press release on October 25, 2018. 

Dutch Banks Join Forces

The two banks are going on trial to test the blockchain’s technical feasibility to be used for solutions that will manage settlement of securities transactions, payments, interest payments, and repayments at the maturity of a bond. The banks have already deployed their prototype which was developed using both Hyperledger Fabric (version 1.0) and the Digital Asset Platform and subjected to stressful performance tests.

The Deutsche Bundesbank is the independent central bank of the Federal Republic of Germany. It has formed part of the Eurosystem since 1999, sharing responsibility with the other national central banks and the European Central Bank for the single currency, the Euro.

Eurosystem monetary policy is the Bundesbank’s core business area. Its main task is to secure financial stability in the euro area. Also, the Bundesbank performs other essential tasks at both the national and international level. Amongst these is ensuring the smooth functioning of domestic and foreign payments.

Burkhard Balz, Member of the Executive Board of Deutsche Bundesbank, commented:

“During this project, Deutsche Bundesbank and Deutsche Börse learned a lot about the usage of this technology and its concrete implementation. We expect the rapid development to continue, and also see the potential in using it for high-volume applications. The approach of a permissioned architecture, which takes into account the requirements of the financial sector from the outset, has proven to be right.”

Both prototypes have done well during the stress tests proving to be suitable to be used on a realistic financial market infrastructure. Since the companies decided to go for two platforms, they will have two approaches to evaluate, both of them using the distributed ledger technology.

Advancing Finance via Blockchain Technology

While the Digital Asset Platform proved to be extremely useful for the management of assets, the Hyperledger Fabric have had subsequent releases which will streamline the way further development can be done.

Deutsche Börse Group is one of the largest financial organizations in the world. The company strives to maintain its core values which are characterized by integrity, transparency, and safety for investors. The Group CEO of Clearstream Banking AG and Head of Clearstream Global Operations, Berthold Kracke also commented the announcement by saying:

“We are very happy with the results of the project. The tests have shown that blockchain technology is a suitable basis for applications in the field of settlement and other financial infrastructures. Thanks to the cooperation with Deutsche Bundesbank and the expertise of Digital Asset, we were able to tailor the product to the needs of the industry.”

The two blockchain prototypes used were the result of a joint operation that used the distributed ledger technology as a base to settlement technology research which is a collaborative project between the two companies. The project resulted in a report called BLOCKBASTER which evaluates the performance tests and analyses the pros and cons of using blockchain-based solutions for securities settlements and other financial services.