Deutsche Bundesbank Optimistic About Blockchain For Financial Markets
Speaking at the ninth Annual IIF G20 Conference on March 15, 2017, Dr. Jens Weidmann, President of Deutsche Bundesbank, stated that digitalization within the financial market is one of the top priorities for Germany because it can deliver a “wealth of benefits.”
In his speech, Weidmann expressed that he is uncertain about a “revolution” occurring in the financial service sector due to digitization, but is optimistic that new technologies like blockchain will contribute to significant efficiency gains, boost competition, and open doors for new competitors, such as fintech startups. He believes that despite lowering profit margins among banking systems, fintechs could be progressively beneficial, on the whole.
“However, one certainly can't deny that new technologies like blockchain, robo advisors or crowd funding could have the potential to make financial markets and services faster, more efficient, more convenient, and more inexpensive for everyone.”
Weidmann also stated that these qualities are why central banks, including the Bundesbank, are making a consistent effort to carry out research into the technology. In November 2016, the Deutsche Bundesbank and Deutsche Börse AG, a marketplace organizer for the trading of shares and other securities, presented a prototype for blockchain technology-based security settlements that was designed primarily to deliver security payments – mostly for centrally-issued digital coins. The prototype also experimented with the settling of basic corporate actions, such as coupon payments and redemption of maturing securities.
“The idea behind this joint project is to analyse the technological performance and scalability of blockchain-based applications. It is not the intention to issue a digital euro coin.”
Weidmann also believes that due to its ability to mitigate risk, digitization will lead to more financially stable markets. However, he also stressed the need for regulation within the fintech sector “at least to a certain extent,” as irritants like cybercrime disrupt public trust in the financial system.
He concluded with a warning:
“Carrying out deregulation in the hope of stimulating the economy could backfire. Insufficiently regulated financial markets can do significant harm to economic prosperity if a crisis occurs, as the latest financial crisis has painfully demonstrated.”