The digitization of financial services could see notable benefits from innovations like blockchain technology, according to the president of Germany’s central bank.
Dr. Jens Weidmann, president of the Deutsche Bundesbank was speaking at a G20 conference yesterday with a focus on international finance from a German agenda.
Digital finance and the digitization of the financial sector was underlined as a priority in the agenda. While some argue if financial technology or FinTech really is a revolution, the central bank chief added it would bring a competitive threat to the current banking industry which figured among the audience during his speech [PDF].
Pinning the innovation alongside new financial services like robo advisors and crowd funding, Weidmann said blockchain could enhance the financial industry in a number of ways.
Fintech, while possibly a threat to the profit margins among traditional banks, would have a “positive impact on overall welfare,” the official stated, adding:
The question of whether diigitalisation will lead to a revolution in financial services and infrastructure, as some commentators argue, remains unanswered for the time being, in my view. However, one certainly can’t deny that new technologies like blockchain, robo advisors or crowd funding could have the potential to make financial markets and services faster, more efficient, more convenient and more inexpensive for everyone.
With this in mind, central banks are actively researching the implications of blockchain technology and “the Bundesbank is among them,” Weidmann stated.
Earlier this year, Weidmann, who is also chairman of the board of directors of the Bank of International Settlements, addressed blockchain as a technology that could “allow payment transactions and securities settlement to bypass banks and central counterparties altogether.”
During his speech yesterday, the central bank’s chief pointed to a blockchain prototype jointly developed by the central bank and Germany’s securities exchange operator, Deutsche Börse. While some central banks are exploring blockchain technology toward issuing digital currencies, the German central bank is only exploring the performance and scalability of the innovation. CCN previously reported on the details of the prototype, which includes payment settlements, transferring securities and other capabilities using blockchain technology.
Addressing the risks of new financial technologies, the official confirmed that Germany will look toward “identifying key regulatory issues to safeguard financial stability.”
“This calls for the regulation of fintechs. At least to a certain extent,” Weidmann added.
Featured image from Flickr/Chatham House.