Deutsche Bundesbank and Deutsche Börse jointly built a functional prototype for the settlement of securities that are based on blockchain technology.

The blockchain prototype will offer technical functionality for blockchain-based settlement of securities in a delivery and payment mode, for centrally-issued digital coins. The product has the potential to settle basic corporate actions including coupon payments on securities and the redemption of maturing securities.

“With the blockchain prototype, the Deutsche Bundesbank and Deutsche Börse want to work together to find out whether this technology can be used for financial transactions, and if so, how this can be achieved. The Deutsche Bundesbank hopes that this prototype will contribute to a better practical understanding of blockchain technology in order to assess its potential," Carl-Ludwig Thiele, Member of the Deutsche Bundesbank's Executive Board said.

The collaborative blockchain prototype is rich in features that include maintenance of access rights in blockchain-based concepts on the basis of a flexible and adaptable rights framework, general observance of existing regulatory requirements, blockchain-based securities and payments transfers and settlement of securities transactions beside both instant and delayed payment, among others.

"Along with the Deutsche Bundesbank we are innovatively and creatively addressing potentially radical technological opportunities for the financial sector. We will continue to do our utmost to leverage blockchain's efficiency potential and to better understand and minimize the associated risks of this technology," Carsten Kengeter, CEO of Deutsche Börse AG said in a release.

The blockchain prototype is purely a conceptual study and the first result of the collaborative research project between both the institutions. The partners will continue to work on improving the prototype and drawing up a test concept over the next few months.