What has happened?
Deutsche Bundesbank, Germany's central bank, and Deutsche Börse, which operates the Frankfurt Stock Exchange, have completed joint performance prototypes for securities settlement based on blockchain technology.
What does this mean?
In a joint press release, the two organisations said that the two prototypes support the settlement of securities transactions, payments, interest payments and bond repayments at maturity.
The project, nicknamed BLOCKBASTER (which stands for blockchain based settlement technology research) started in March 2016 and "was motivated by developments in the financial industry as well as by advances in new technology".
The project, which was for research purposes and not intended to produce an operational system, aimed to create "a conceptual prototype" for a blockchain-based transfer and settlement of securities and cash.
The prototypes were intended to function as a sandbox for testing blockchain-based securities settlement, including the full lifecycle of bond issuance, settlement, corporate actions, redemption as well as cash transfer, including provisioning of digital coins, transfer between market participants and settlement of cash payments.
The prototypes were developed by Hyperledger Fabric and the blockchain platform created by Digital Asset.
The tests showed that the prototypes can facilitate the "productive operation of a realistic financial market infrastructure".
Recent upgrades of both blockchain platforms could further improve performance if integrated, it adds.
"The tests showed that both prototypes are suitable for the productive operation of a realistic financial market infrastructure and can serve as a basis for further development. Both the Digital Asset Platform and the Hyperledger Fabric have had subsequent releases which may even improve the performance," the release said.
Berthold Kracke, CEO of Clearstream Banking and head of Clearstream Global Operations at Deutsche Börse Group said:
“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."
Burkhard Balz, Member of the Executive Board of Deutsche Bundesbank, said:
“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.”
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