Deutsche Börse Group, one of the largest exchange organizations worldwide, has combined blockchain technology with its proven post-trade infrastructure and unveiled a concept for riskless transfer of commercial bank money via an infrastructure based on distributed ledger technology. Thus, the company strives to explore new business opportunities enabled by this technology.
The concept is based on a collateralised coin, “CollCo”. All peer-to-peer payments based on tokenised commercial bank money are accompanied by movements of collateral between the respective Eurex Clearing members using the central counter party’s functionality and rules.
CollCo focuses both on existing and potential new use cases including the handling of margining requirements, credit risk free payments, and delivery-versus-payment asset/value transfer on the blockchain.
Distributed ledger technology is a subject of much controversy as a potentially disruptive technology capable of transforming the financial industry. Participants of the financial process get an opportunity to interact directly without intermediaries, which makes complex processes much simpler.
Deutsche Börse Group as an established market infrastructure provider can significantly contribute to the adoption of distributed ledger technology while at the same time fulfilling industry standards. These include legal and regulatory provisions, security standards, risk management as well as cost efficiency aspects.
“Developing and launching new cutting-edge offerings is core for Deutsche Börse,” said Carsten Kengeter, CEO of Deutsche Börse AG. “Distributed ledger technology has remarkable potential. With this pilot, we are adding another pioneering element in the area of payments and value transfer to the debate around blockchain. We look forward to further consulting with clients, regulators and central banks on our project.”
Credit risk inherent in tokenised coins can be minimized due to collateralisation at Deutsche Börse Group’s central counter party, Eurex Clearing. As far as Eurex Clearing cooperates with the Group’s central securities depository Clearstream, the newly developed concept can also allow for efficiency gains in post-trade processes like settlement and asset servicing.
“Our innovative concept can be the basis for a variety of use cases, among them credit risk free cash transfers and the value transfer of assets on the blockchain,” explained Eric Müller, CEO of Eurex Clearing, Deutsche Börse’s clearing house. “Through the involvement of our CCP as trusted third party, a clear set of rules and governance would be ensured.”
Deutsche Börse Group is an active participator in the blockchain area. Its recent activities include development of a blockchain solution for cross-border collateral transfer in cooperation with the Liquidity Alliance, the joint development of a functional prototype for the blockchain technology-based settlement of securities with Deutsche Bundesbank. Deutsche Börse is also a premium member of Hyperledger Project as well as it takes a minority stake with a board seat in Digital Asset Holdings.