The German Banking Industry Committee has published the results of a proof of concept (PoC) for the Commercial Bank Money Token (CBMT) project. It ran the trials in association with the Federation of German Industries (BDI). While many tokenized deposit projects target financial or interbank applications, CBMT is focused on serving large corporates, especially industrial companies.
Five banks participated (DZ Bank, Deutsche Bank, Commerzbank, Unicredit and Helaba) in the PoC alongside five enterprises (Airplus, BASF, Evonik, Mercedes Benz and Siemens).
The CBMT concept allows clients from various banks to conduct transactions using digital currency, much like traditional bank payments. The tokens are created on multiple third-party distributed ledger technology (DLT) networks, such as a consortium blockchain, targeting corporate customers.
When an enterprise receives a CBMT token from a bank where it doesn’t hold an account, the token will be converted into one from its own bank. Essentially, the banks exchange these tokens. There’s an additional step that clients don’t see in which the banks settle between themselves in the conventional way.
Key features would be the ability for corporates to hold tokens from multiple banks and to make P2P (B2B) transactions 24/7/365. Given this is bank money requiring compliance, recipients have to be whitelisted. As with other digital payments, there’s atomic settlement ensuring both sides of a transaction either happen or fail. CBMT also aims to support tiny transactions of a fraction of a cent up to very large ones worth millions or more.
The appeal to corporates
One obvious question is why not use stablecoins given they are available today? Siemens’ Ramin Ghafari explained the preference for CBMT – the tax, accounting and legal treatment of CBMT are the same as for conventional bank money.
He also discussed some of the use cases during a recent CBMT webinar. With industrial IoT, there’s an increasing automation of the manufacturing process.
Potentially one could automatically invoice a customer based on the number of hours a machine is used. Typically invoices tend to be for large amounts. If the customer and manufacturer automate payments using CBMT, it makes sense to invoice more regularly for smaller amounts. As a result, this leads to better working capital management.
The CBMT PoC
The trials involved a variety of use cases, from basic money transfers to streaming and multi-currency payments.
Since the CBMT tokens will be used on different enterprise DLT networks, it is necessary to be technologically agnostic. Hence, the PoC trial used three different networks:
- a private permissioned network using R3’s Corda
- NEXI using Hyperledger Besu on the private permissioned SiaChain
- the European Public Network, an Ethereum compatible public permissioned network.
At this stage the tests were standalone simulations without integration with bank or corporate systems, but that’s something the group plans to explore in the next phase.
The participants agreed that CBMT has significant potential. The next step will expand the number of participants.
Ledger Insights Research has published a report on bank-issued stablecoins and tokenized deposits featuring more than 70 projects. Find out more here.
