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In a significant development for digital financial markets, Clearstream, DekaBank, and DZ Bank have successfully issued 2 tokenised €5 million bonds using distributed ledger technology (DLT) as part of European Central Bank (ECB) trials into the viability of DLT for settling wholesale transactions in central bank money. The transactions mark the first institutional-grade issuances in Germany using DLT and settling in central bank money.
The trials, conducted in a production environment using real central bank money, are scheduled from May to November 2024.
Technical Implementation
The entire process was executed on Deutsche Börse's D7 DLT platform, encompassing the security transaction itself and the transfer of funds using digital central bank money. This covered the full lifecycle from issuance to distribution, settlement, and management. DekaBank acted as issuer, DZ Bank as investor – with swapped roles in the second case. Clearstream acted as DLT Market Operator, providing the technical infrastructure with its digital securities platform D7 developed in strategic partnership with Google Cloud. By connecting D7 with the Bundesbank Trigger Solution, the bond settlement is seamlessly reflected in the European TARGET2 payment system.
Clearstream functioned as the DLT Market Operator, providing the technical infrastructure through its D7 digital securities platform, developed in partnership with Google Cloud. The platform's connection to the Bundesbank Trigger Solution enables seamless reflection of bond settlement in the European TARGET2 payment system.
Potential Benefits
The use of DLT in securities issuance is expected to increase transparency and automation, potentially reducing the need for manual intervention. Additionally, the use of central bank money aims to provide enhanced safety, liquidity, and monetary policy alignment for both issuers and investors.
Silvio Lenk, Head of Treasury, DekaBank
Silvio Lenk, Head of Treasury at DekaBank, commented on the process: "The use case impresses with the simplicity of issuing a security with DLT technology and at the same time benefiting from the advantages of the Trigger Solution. The delivery versus payment of the Trigger Solution proves how the issuing and settlement processes of private blockchains and wholesale CBDC will interact in future. As issuer, banks benefit from the speed, scalability and security of the new technology."
Dr. Holger Meffert, Head of Securities Services & Digital Custody, DZ Bank
Dr. Holger Meffert, Head of Securities Services & Digital Custody at DZ Bank, emphasised the importance of addressing the entire lifecycle of digital assets: "To explore the potential of digital assets, you have to take care of the whole lifecycle – from issuance via dvp settlement to maturity including the utilisation of central bank money. Participating in the ECB trials with strong partners like Deutsche Börse Group and DekaBank, we are delighted to get valuable insights on our way to higher efficiency."
Jens Hachmeister, Head of Issuer Services & New Digital Markets, Clearstream
Jens Hachmeister, Head of Issuer Services & New Digital Markets at Clearstream, highlighted the significance of the transaction: "With the next-generation digital post-trade platform D7 Clearstream aims to digitise the entire post-trade value chain. With our new D7 DLT, launched for the ECB trials, we provide seamless processing of digital assets and high-quality cash on-chain, which is an important step in developing a digital European securities landscape. This transaction represents a significant milestone for the creation of stable digital capital markets in Germany and Europe, demonstrating the power of digital solutions in enhancing safety, liquidity and efficiency."
