According to Cointelegraph's October 23 report, the Deutsche Boerse and the German commercial bank jointly completed the transaction settlement pilot for after-hours securities using digital currency and distributed ledger technology (DLT).
Currency conversion of commercial banks' currency and securities
The Deutsche Börse officially announced the deal on October 23. One of Germany's largest insurance companies, Munich Reinsurance Group and the MEAG Asset Management Company of the Angkor Insurance Group, also participated in the pilot. At the same time, the Deutsche Börse pointed out that it and the German commercial bank jointly studied the concept of law and developed the basic technology.
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The settlement completed the payment delivery and the tokenized cash transfer. According to the announcement, participants issued digital tokens in the transaction with commercial bank currency and securities, which in turn generated cash tokens and securities tokens.
New milestone: Applying DLT technology to after-hours trading
Subsequently, the European Futures Exchange settlement company of the Deutsche Börse serves as a central counterparty and a tokenizer of cash, while the German commercial bank uses tokenized cash as collateral.
The Deutsche Börse pointed out that at the same time, MEAG bought securities and German commercial banks sold and kept securities tokens.
According to the Deutsche Börse, blockchain technology simultaneously achieves a final and binding settlement of token swaps. As a result, three trading participants have achieved another milestone in exploring the application of distributed ledger technology to after-hours services.
Regulators have not approved such transaction types
The Deutsche Börse added that the concept of pilot transactions has been shared with regulators, but further implementation still requires their approval.
Frank Wellhofer, a MEAG management committee member, pointed out that the after-hours blockchain pilot can bring many benefits, such as reducing the demand for third parties and accelerating the securities trading process. He said:
Replacing securities and goods with tokens will help improve network efficiency and lay the foundation for the creation of standards. This is important for the buyer because the unified standard will expand the market acceptance and bring overall liquidity to the DLT platform.
In March 2019, the German Commercial Bank and the Deutsche Börse completed a proof of concept for a block-based and legally binding repo.