A trial project using blockchain to transfer and settle securities and cash proved more costly and less speedy than the traditional way, Germany’s central bank president said.
The experiment, launched by the Bundesbank together with Deutsche Boerse in 2016, concluded late last year that the prototype “in principle fulfilled all basic regulatory features for financial transactions.” Yet while advocates of distributed ledger technology say it has the potential to be cheaper and faster than current settlement mechanisms, Jens Weidmann said the Bundesbank project did not bear those out: “The blockchain solutions did not fare better in every way: the process took a bit longer and resulted in relatively high computational costs,” Weidmann said in Frankfurt on Wednesday. “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.”
A growing number of global central banks have started exploring distributed ledger technology for their financial systems. European Central Bank Executive Board member Yves Mersch said that it’s important to differentiate between “assets” such as bitcoin and the technology behind them. “Some of the technology is worth exploring and could also be of interest to central banks,” he said. “That said, our role is not to drive technological adoption by the industry and the general public, but to ensure that changing preferences can be satisfied in a secure way.”