German banks begin deposit tokens trials with plans for multi-currency expansion

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The German Banking Industry Committee (GBIC) has made public a working paper for using deposit tokens among commercial banks in the country.

The document sheds light on the basic design for a Commercial Bank Money Token (CBMT) with four of Germany’s largest banks taking part in the experiments. Commerzbank, Helaba, Unicredit, and DZ Bank are the initial batch of financial institutions participating in the experiments, with the GBIC hinting at an expansion.

Under the study, commercial banks will attempt to settle transactions using digital currencies termed bank “deposit tokens” in a manner akin to conventional payment methods. The tokens are minted on blockchain technology, with corporate entities being the target client base of the new offering.

Dr. Andreas Martin, a Board of Managing Directors of the National Association of German Cooperative Banks member, described the experiments as integral to Germany’s ambition of building an intuitive payments ecosystem. He added that deposit tokens could offer several use cases, such as continuous automated payments, delivery versus payment, and pay-per-use.

“Through a symbiosis with Industry 4.0 technologies, the CBMT can be seamlessly integrated into industrial processes and thus become an integral part of the value chain,” said Martin.

GBIC’s document explores a new model for the support of multiple currencies with deposit tokens. The GBIC notes that although clients may have single-currency bank accounts, its corporates may have multiple currency accounts that could pose a problem for using deposit tokens.

Under the new model, corporates with multiple currency accounts may receive funds “that will automatically be converted to a token of their own bank in their home currency.” While the paper remained coy on which party will handle the foreign exchange transaction, analysts believe that the recipients’ financial institution will be saddled with the task.

Deposit tokens record significant activity

Deposit tokens are inching their way into mainstream financial systems, with the Swiss Banking Association (SBA) releasing a white paper containing plans for their launch. The plan notes that the deposit token will operate as a stablecoin under the banner of a digital Swiss franc for myriad use cases in decentralized finance (DeFi).

The Monetary Authority of Singapore (MAS) had previously explored offering deposit tokens under its Project Guardian study in 2022. JPMorgan and Oliver Wyman released a joint study on the benefits of deposit tokens on global financial markets, whipping up new interest in the tokens.

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