The German Banking Industry Committee (GBIC) has released a working paper that outlines the use of deposit tokens by commercial banks in Germany. The paper provides details on the design of a Commercial Bank Money Token (CBMT), which will be experimented with by four of the largest banks in the country, namely Commerzbank, Helaba, Unicredit, and DZ Bank. The GBIC has indicated that more financial institutions may be added to the experiment in the future.
As part of the research, commercial banks will make an effort to make transactions with the help of digital currencies known as bank “deposit tokens”, just like typical payment methods. The tokens are created using blockchain technology and are mainly targeted towards corporate clients.
Dr. Andreas Martin, a member of the Board of Managing Directors of the National Association of German Cooperative Banks, emphasized the significance of the experiments for Germany’s objective of creating a payments ecosystem that is user-friendly. He further explained that deposit tokens could have various applications, including automated payments, delivery versus payment, and pay-per-use.
“Through a symbiosis with Industry 4.0 technologies, the CBMT can be seamlessly integrated into industrial processes and thus become an integral part of the value chain,” said Martin.
In its report, GBIC proposes a fresh approach to facilitate the use of deposit tokens while supporting multiple currencies. The document highlights the challenges that corporates with several currency accounts face while using deposit tokens, even if their clients have bank accounts denominated in a single currency.
As per the new system, companies having numerous currency accounts can get funds that will be transformed into a token of their respective financial institution in their native currency. Even though the source article did not reveal who will manage the foreign exchange operation, experts speculate that the recipient’s bank will have to undertake this responsibility.
The use of deposit tokens is gradually becoming more common in the financial industry, as the Swiss Banking Association (SBA) has recently unveiled a whitepaper outlining its introduction. The plan specifies that the deposit token will function as a stablecoin and be known as the digital Swiss franc, and will have numerous applications within the realm of decentralized finance (DeFi).
In 2022, the Monetary Authority of Singapore (MAS) investigated the possibility of introducing deposit tokens as part of their Project Guardian initiative. Recently, there has been a renewed interest in deposit tokens in the global financial markets due to a joint study conducted by JPMorgan and Oliver Wyman highlighting their advantages. This study has generated fresh interest in deposit tokens.
