Last year the Deutsche Borse unveiled the launch of D7, a post-trade platform for digital securities. It is now reaching its second milestone by issuing digital native securities in the fourth quarter. While the last phase uses smart contracts, securities are not yet blockchain-based, which is planned for a third phase.
“We are moving away from various isolated platforms towards our vision of a common digital financial ecosystem,” said Jens Hachmeister, Deutsche Börse Managing Director, Issuer Services & New Digital Markets.
The main goals of the solution are to enable same-day stock issuance and straight-through processing.
A spokesperson told Ledger Insights that the digital securities issuance will be available for production in the fourth quarter of the current year as the exchange has completed issuance testing with its pilot customers. When he unveiled D7 last year, those clients included BNP Paribas, Citi, DekaBank, Deutsche Bank, dwpbank, DZ Bank, Goldman Sachs, Raiffeisen Bank International and Vontobel.
So far, securities are issued on a central cloud-based ledger at Clearstream, owned by Deutsche Börse, using Digital Asset‘s DAML smart contract language for workflow. Digital Assets CEO and co-founder Yuval Rooz told Ledger Insights, “The ability to model the entire lifecycle of an asset as a smart contract at this level of complexity is something we are going to see more and more in the industry. It’s great to see Deutsche Börse leading the way with D7.
In mid-2021, Germany passed its eWpG legislation which supports digital native electronic securities that do not have physical certificates. These can be either centrally registered securities, like the current iteration, or crypto securities if they are blockchain-based. Deutsche Börse sees this change and the Luxembourg Blockchain Law as crucial drivers for the evolution of the security industry. This legal breakthrough, alongside the EU’s DLT Pilot scheme, which will come into effect in March 2023, will allow the exchange to internationalize the D7 platform.
Next step: blockchain-based securities
The fellowship refers to the third D7 iteration as DeNet (Decentral Network), which helps integrate existing and newer technologies such as distributed ledger (DLT). He said he plans to support “multiple blockchains and protocols,” with VMware Blockchain and R3’s Corda mentioned last year.
While DeNet will initially focus on enterprise blockchains and e-securities, the exchange has previously said it plans to support other asset classes and payment solutions in the future.
Deutsche Börse has been active in the field of blockchain for years. It is a major investor and partner of HQLAX, the collateral management platform. Just over a year ago, he spent over $100 million to acquire a majority stake in cryptocurrency exchange Crypto Finance. And its XETRA exchange has long supported crypto-based ETPs with ETNs for twenty individual coins plus baskets. He has also invested in digital asset firm 360x and AirCarbon Exchange.