The President of Germany’s central bank is not a fan of digital currencies and the blockchain technology that underpins them.
In a speech given to a Deutsche Bundesbank symposium, Jens Weidmann, argued that the former are a serious threat to the stability of the financial system, and the latter is no better than solutions already on offer.
By way of example, he spoke about a joint project with Deutsche Börse on the use of blockchain technology for the settlement of cash and securities. “The blockchain solutions did not fare better in every way: the process took a bit longer and resulted in relatively high computational costs,” he said.
“Similar experiences have been made elsewhere in the financial sector. Despite numerous tests of blockchain-based prototypes, a real breakthrough in application is missing so far.”
Last year, we reported that Deutsche Börse was establishing a DLT, Crypto Assets and New Market Structures unit as it looked to tap into the “transformational potential of blockchain technology”.
The German exchange set up a 24-person team led by Jens Hachmeister. “DLT/blockchain technology is a key opportunity for the creation of new market structures, adding new products onto our present structures and enhancing our existing offerings,” he said.
He added that its potential cuts across the group’s entire value chain – pre-IPO/listing, trading and clearing, settlement and custody, and even the data and analytics business. At the same time, however, he stressed that expectations were high and not all of them would be fulfilled; blockchain will not be the answer to all its questions.
“Yet the digital economy in general is heading for decentralisation. In future, there will be more peer-to-peer governed marketplaces and less intermediaries,” he commented. “In that regard, blockchain has the potential to disrupt the capital markets infrastructure. It is a decentralised ledger of all transactions across a peer-to-peer network, where participants can confirm transactions without the need for a central certifying authority. Many other industries have also acknowledged the significance of this technology.”
Deutsche Börse has invested in various initiatives to understand the technology and its potential within the traditional segments of its value chain. However, these steps have not been coordinated on a group-wide level. “In order to use the full potential of the technology for our businesses, to generate efficiencies and create revenues, a centrally steered approach is necessary to make a greater impact,” Hachmeister said.
“All initiatives in the field of DLT/blockchain will now be operated by one team, in a joint group-wide approach. We will, of course, work in close cooperation with the business segments and IT and in close alignment with colleagues from Group Legal and Group Regulatory Strategy.”
A new era
He concluded by stating that Deutsche Börse is witnessing the beginning of a new era that could disrupt the entire industry. “The challenge is that we don’t exactly know where this will lead to. The possibilities this new technology offers are fascinating and it is great to have the opportunity to hopefully make significant contributions and to drive this topic forward for the group. My team and I are very motivated to drive this journey for Deutsche Börse, as I am personally convinced of the great potential for our company.”
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