Germany’s biggest banks have banded together to work on the pilot of deposit tokens and a multi-currency concept using the commercial bank money tokens (CBMT) model. Commerzbank, DZ Bank, Helaba, and UniCredit have partnered with four corporate entities to develop the system, which will enable clients of different banks to make payments to each other using digital currency, similar to traditional bank payments. Based on its structure, the CBMT system will be created on third-party DLT networks like a consortium blockchain, with corporate customers as the target users.
The CBMT Model Expansion
According to Ledger Insights, the German banking associations have expanded the CBMT model to support multiple currencies, which is a significant advantage for corporate clients managing multiple accounts in different currencies. Under its infrastructure, some corporates may receive deposit tokens in a currency they do not have an account with, and the system will automatically convert it to a token of their own bank in their home currency. However, the paper did not specify which bank would handle the foreign exchange (FX) trade, although it is expected to be the recipient’s bank.
The CBMT model enables banks to exchange tokens and settle with each other like traditional payments. It makes digital payments between them and their clients seamless and straightforward, especially for corporate clients. The platform is specifically tailored to support commercial bank money tokens and among its first adopters are likely the four major German banks actively involved in the project.
Primary Advantages and Challenges Unlocked by the Proposed Model for Deposit Tokens
One of the primary advantages of the CBMT system based on its paper is its versatility, which enables it to support various currencies. This makes it particularly beneficial for corporate clients who have accounts in multiple currencies, as they can receive payments without conversion.
However, as DLT networks grow larger, banks may face competition for FX transactions. FX transactions performed by banks tend to be expensive, which is why some DLT participants may prefer to engage specialized FX operators who can execute FX transactions at better or more competitive rates.
The CBMT system developed by Germany’s largest banks is a significant step towards a digital banking system that is efficient, seamless, and accessible to corporate clients. The system’s expansion to support multiple currencies makes it even more useful for corporate clients with accounts in various currencies. With the CBMT model, banks can now settle payments more efficiently and effectively, which will boost the banking industry’s growth and development in Germany.
Final Thoughts
Overall, the collaboration of Germany’s largest banks to develop the CBMT system is an innovative step towards creating a digital banking system that meets the needs of corporate clients. It is designed to be versatile, and it supports multiple currencies, making it particularly useful for clients with accounts in different currencies.
While there may be competition for FX transactions as DLT networks grow larger, the CBMT system remains a promising development that will enable seamless digital payments between banks and their clients.