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Blockchain gets a bashing from Deutsche Bundesbank president

Digital currencies, and their foundational blockchain backbone, have come in for a kicking from the president of Germany’s central bank, who has characterized the former as a serious threat to the stability of the financial system, and the latter as no better than current technological solutions

In a speech given to a Bundesbank symposium, Jens Weidmann, reflected on the underwhelming outcome of a joint experiment with Deutsche Bourse on the use of blockchain technology for the settlement of cash and securities.

While the prototype developed to test the technology fulfilled all the relative objectives, and recorded some positive outcomes in terms of higher resiliency and lower cost of reconciliation, Weidman was unconvinced that it could be taken seriously as a replacement mechanism for current processes.

“The blockchain solutions did not fare better in every way: the process took a bit longer and resulted in relatively high computational costs,” he says. “Similar experiences have been made elsewhere in the financial sector. Despite numerous tests of blockchain-based prototypes, a real breakthrough in application is missing so far.”

Weidmann also sounded a note of caution on central bank experiments with digital currencies, which he warns have the potential to destabilise the financial system during times of crisis.

Easy access to digital money could exacerbate bank runs in times of crises, he said, leading to a faster collapse of lenders, an increase in volatility and an immediate impact on central bank balance sheets.

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This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

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