German Banking Giants KfW and BSD Prepare to Issue New Blockchain-Based Bond As Part of ECB’s Trials

• The European Central Bank (ECB) is testing blockchain technology's ability to manage central bank funds.
• As part of the initiative, Kreditanstalt fur Wiederaufbau (KfW) is launching a blockchain-based digital bondin partnership with Boerse Stuttgart Digital (BSD), an infrastructure provider.
• Additionally, the Deutsche Bundesbank is merging blockchain technology and central banking to enhance the traditional financial system's transaction speed and security.
• Each of these blockchain ventures signifies Germany's move to become a hub for innovative financial solutions.

German banking giants KfW and the Deutsche Bundesbank are exploring crypto as part of the ECB's tests for leveraging blockchain technology to manage central bank funds.

KfW will soon launch a blockchain-powered digital bond (a crypto security), while Deutsche Bundesbank is exploring how blockchain technology can enhance transaction speed and security.

Let's explore what joining the blockchain movement means for traditional finance entities.

Leading German Entities Back KfW's Blockchain Bonds

Cashlink Technologies GmbH is the crypto securities registrar for KfW's blockchain-based digital bond. Boerse Stuttgart Digital (BSD) will manage and safeguard the private keys and digital walletsunder the Electronic Securities Act (eWpG).

eWpG facilitates the modernization and digitalization of securities in Germany, enabling the trading and issuance of securities without a physical certificate through blockchain technology's transparency.

There are several benefits to KfW and BSD's bond partnership:

• Ensures compliance: Financial regulations and central bank oversight enhance investor confidence in blockchain assets.
• Safeguards transactions: BSD overseeing the crypto wallets and private keys mitigates the risk of crypto fraud during bond issuance and redemption.
• Enhances efficiency: Blockchain technology reduces transaction times and minimizes delays compared to traditional financial bonds.
• Drives innovation: Bond issuance boosts technological advancements in Germany and across Europe.

Notably, KfW introduced Germany's first blockchain bond in 2024 - a 100M Polygon-based crypto security with a 3.125% yield that expires on December 10, 2025.

Leading German banks Deutsche Bank, LBBW, DZ Bank, and Bankhaus Metzler were the bond's bookrunning consortium. They helped ensure the rest of Germany's banking system got involved.

Other ECB Blockchain-Powered Tests

As part of the ECB's blockchain technology trials for settling centralized financial transactions, the Deutsche Bundesbank created a new system dubbed the Trigger Solution.'

The Trigger Solution connects blockchain platforms with existing Eurozone payment systems, making transactions faster and more secure.

Initially, it was developed by the Finance Agency and Deutsche Borse. However, ithas since migrated to TARGET2 and T2 infrastructure.

Verdict - Blockchain May Enhance Germany's Financial Systems

Both the KfW and BSD, and Deutsche Bundesbank's blockchain initiatives signifythe next step in uniting traditional financial systems with the blockchain.

By leveraging blockchain technology, Germany may become a hub for innovative financial solutionsand technological talent.

If the tests are successful, decentralized technology will likely beintegrated into more financial systems under the ECB.

References

• What is the eWpG? (NYALA)
• Trigger Solution (Deutsche Bundesbank)

The post German Banking Giants KfW and BSD Prepare to Issue New Blockchain-Based Bond As Part of ECB's Trials appeared first on The Tech Report.