German banking report highlights the growing shift towards peer-to-peer and machine-to-machine … (+) payment transactions, which dilutes the importance of bank intermediation and sometimes becomes an obstacle .
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It may seem counterintuitive for banks to promote bankless payments, but a proof of concept report from the German Banking Industry Committee says that the company’s new money token “allows businesses to bypass intermediaries such as banks. “You can transfer funds directly from wallet to wallet.” Yes, you read that correctly! But if you think banks are finally giving in to decentralized finance, think again. This report suggests how banks can respond in an increasingly decentralized world by adapting to blockchain technology, while strengthening their control through access and participation.
The committee, which represents more than 1,700 banks, released a report on commercial bank money tokens, acknowledging that “traditional forms of money and payment systems have reached their limits.” The report highlights the growing shift towards peer-to-peer and machine-to-machine payment transactions, which has diluted the importance of bank intermediaries and, at times, become a hindrance. Instead of giving up control, banks are experimenting with “account-based” systems that mirror existing deposits. This approach allows us to leverage the efficiencies of blockchain while maintaining centralized control of access and maintaining a deposit-based funding model.
Amazing Bitcoin Rhetoric
Interestingly, the report’s rhetoric echoes the sentiment of the Bitcoin whitepaper, which proposed “peer-to-peer payments without going through financial institutions.” For Bitcoin supporters, the adage “imitation is the sincerest form of flattery” may come to mind. However, whereas the Bitcoin whitepaper envisioned bypassing banks completely, this report highlights that banks are adopting the technology while maintaining central control.
Comparison of tokenized deposits and CBDC
Additionally, the report highlights the need for banks to remain competitive in the face of central bank digital currencies, stating that the “unrestricted introduction of retail CBDCs” could lead to disintermediation and lock banks out of the payments process. I’m warning you that there is. To counter this threat, the report suggests that the introduction of tokenized bank deposits is central to banks’ strategies.
With digital identity at the core
The report’s recommendations emerge as the digital world faces identity management challenges such as poor user experiences and data breaches. Traditionally, identities have been siled across services, but self-sovereign identities offer a future where individuals are in control of their data without relying on a centralized platform like a bank. The EU’s eIDAS 2.0 regulation requires the private sector, including banks, to accept these credentials.
Comparison of deposit tokens with SSI and DeFi
As decentralized identity solutions grow, just as banks’ role in payments diminishes, so too will their control over verified access. The report suggests that banks, while maintaining their central role, are positioning themselves by allowing bank-approved organizations to engage in wallet-to-wallet payments. . On the other hand, tokenized bank deposit strategies, which store funds within bank-controlled systems, are in sharp contrast to the ideals of decentralized finance.
To Be or Not to Be (center)
The tokenized bank deposit initiative shows that German banks are embracing blockchain, but on their own centralized terms. By controlling identity verification, we currently maintain access control. The question is whether banks can maintain this grip as the world moves toward peer-to-peer payments and self-sovereign identities. Although the report suggests change, centralization remains. Is this enough, or is it time for banks to succumb to a more decentralized future?
