Blockchain or distributed ledger technology has turned out to be a multi-purpose tool, Dr Jens Weidmann, President of the Deutsche Bundesbank, said recently.
Speaking at the G20 conference, "Digitising finance, financial inclusion and financial literacy", Weidmann noted that while banks still exist and will continue to do so, non-banks are just as capable of providing bank services. He said that huge strides made in the field of information and communications technology (ICT) has not only opened up a whole new world of possibilities for designing and distributing financial services, but also transformed traditional banking business.
“Digital finance, and the fintech industry in particular, have experienced very rapid growth in recent years on the back of both supply-side and demand-side forces”, he said.
Further noting the buzz around blockchain technology, Weidmann said that many believe that the technology has the “most disruptive potential”, capable of allowing payment transactions and securities settlement to bypass banks and central counterparties altogether.
“Originally developed for the bitcoin virtual currency, this distributed ledger technology, it would appear, has turned out to be a multi-purpose tool. And even central banks - which aren't typically known for being early adopters of new technologies - are currently doing experimental research on the potential use of blockchain”, he added.
At the same event, Bank of England Governor Mark Carney had said that the BoE is looking into the policy and technical issues posed by Central Bank Digital Currencies (CBDC) and developing blockchain proof-of-concepts.
In November 2016, the Deutsche Bundesbank and Deutsche Börse jointly presented a functional prototype for the blockchain technology-based settlement of securities.
