Germany’s Deutsche Börse completes settlement trial on blockchain

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The German central bank, Deutsche Bundesbank, has partnered with the operator of the Frankfurt Stock Exchange to successfully test the application of blockchain technology in securities settlement. The pilot project utilizes the Hyperledger Fabric and the Digital Asset (DA) blockchain platform.

Deutsche Bundesbank and Deutsche Börse partnered in March 2016 to create a blockchain based project called Blockbaster, which stands for blockchain based settlement technology research, which seeks to develop “a conceptual prototype” for transferring and settling securities and fiat currency.

According to the two firms, the DA-based platform was tested extensively in 30 scenarios while the Hyperledger Fabric-based prototype fulfilled all basic regulatory features required for financial transactions, including Know-Your-Customer (KYC), confidentiality of transfers (need to know principle), and participation of admitted peers only (permissioned network0).

Berthold Kracke, CEO of Clearstream Banking and head of Clearstream Global Operations at Deutsche Börse Group, explains, “The tests have shown that blockchain technology is a suitable basis for applications in the field of settlement and other financial infrastructures.”

The prototypes were developed over a two-year period and functioned as a sandbox for testing blockchain-based securities settlement. Following the trial, the central bank and Deutsche Börse Group concluded that decentralized solutions should be tailored to fit the needs of the financial market.

“During the time of the project we have encountered a further development of the basic technologies which always renders test results as outdated since the technology has already improved,” the report noted. “Providers of blockchain or DLT-based solutions improve their offers and increasingly develop specialized software to serve particular use cases. There seems to be a trend towards products highly customized for individual use cases.

Burkhard Balz, a member of the executive board, Deutsche Bundesbank, explained, “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.”