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Interview with Jens Hachmeister on the proof of concept with Swisscom and partners

21 Nov 2019

Interview with Jens Hachmeister on the proof of concept with Swisscom and partners

As part of their current proof of concept, which Deutsche Börse carried out with Swisscom and three Swiss banks, the partners jointly settled securities transactions using Distributed Ledger Technology (DLT) and shares and cash tokens. We talked to Jens Hachmeister, Head of New Markets, about the successful realisation of the study and why these test transactions are important for us. 

Deutsche Börse is currently conducting proofs of concept with various partners to investigate the possible uses of digitised money on the basis of Distributed Ledger Technology. Why are you so active in this area?

Jens Hachmeister, Head of New Markets

Digitised money – also called ‘cash-on-ledger’ – will be an elementary component for moving digital assets efficiently and securely on a DLT environment in the future. The advantages lie in a highly efficient step-by-step settlement, in which none of the parties had to make any advance payment during the settlement process. And because both assets and money are available on DLT, there is no need for any other systems for the settlement process. This is a substantial advantage. 

For us as a provider of market infrastructure, this new technology offers great potential. It enables a multitude of innovations in the entire financial services sector. However, there are currently still few well-engineered solutions, and such studies therefore also serve to further investigate the useful application possibilities of DLT. 

Along with Swisscom and other partners you have now succeeded in processing a securities transaction with tokens in Switzerland. What are the most important findings you can draw from this project? 

On the one hand, with this project we have shown that our idea of setting up a comprehensive infrastructure for digital assets is beginning to bear fruit – as evidenced by the large number of partners and systems involved. With these transactions, we have succeeded in mapping the entire value chain – from the tokenisation of money and securities to settlement and custody. As a further important step, we have successfully proven that an atomic swap between different DLT protocols actually works. We have established interoperability between the systems, also referred to as cross-chain settlement. This is a central element for the further development of infrastructure for digital assets. And it was also important for us to show that digitised money is depictable in currencies other than the Euro, such as the Swiss franc. The entire transaction was not only a technical test, but was also conducted bindingly under current law. In other words: it was traded productively based on a contractual framework, with real money flowing in. 

The study was carried out with Swiss partners. Would such a settlement also be conceivable for the German market? 

In Germany, we have already carried out two comparable test transactions this year, with Commerzbank and MEAG as partners on board. Even though Switzerland is regarded as a pioneer in crypto/DLT in Europe, Germany has at last caught up considerably. We are taking a decisive step forward with the blockchain strategy adopted by the Federal Government and the legislation expected shortly as part of the current money laundering directive. Here, we expect above all that new basic conditions for appropriate financial services are created based on Blockchain technology. Part of this will be a classification of digital assets as “cryptographic values” within the German Banking Act (KWG) as well as the expected introduction of digital securities. Important steps have therefore been taken to advance the German market in the development of this important future technology. 

What are the next steps? Can you give us a brief outlook? 

With our proof of concept, we have shown this year that cash-on-ledgers, i.e. money on distributed systems, works in principle. Now it is necessary to further tie up the legal and regulatory framework to lay the groundwork for a productive application. For us as providers of market infrastructure, this technology offers great potential and we are now on the right track in Germany. And we already have several ideas for the use of digitised money.

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Deutsche Börse Group develops and operates resilient, state-of-the-art IT systems for trading, clearing, settlement, custody and market data services.

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