Authors: Philipp Sandner, Jonas Gross, Ilia Drozdov

This article sheds light on the application of blockchain technology to the existing financial market infrastructure, namely to post-trade settlement. We show how blockchain technology can facilitate trustless delivery vs. payment (DVP) settlement without any intermediary. Moving settlement processes entirely on decentral technologies makes the settlement process more efficient since it decreases the associated transaction costs and reduces involved risks. Hence, the blockchain-based multichain atomic swap technology will become a peer-to-peer alternative to a central clearing counterparty that normally facilitates the DVP settlement of financial assets.

Introduction

Blockchain technology is more and more applied to financial sector use cases, in particular digital assets. With the term “tokenization”, all kinds of assets can be mapped on blockchain-based systems. In Europe, there are tremendous ongoing efforts to tokenize securities as well as accommodating asset classes such as real estate, art etc. In addition, the regulation of such blockchain-based digital assets gets more and more clear. In Liechtenstein, an own “blockchain law” has come into force. Similarly, in Germany, a law that outlines the regulation for DLT-based debt instruments has been proposed and is expected to come into force in 2021. All these initiatives show that regulatory uncertainty related to blockchain-based assets is decreasing. Thus, blockchain-based financial assets are likely to be used on a global scale in a few years. …


Authors: Markus Kaulartz, Jonas Gross, Constantin Lichti, Philipp Sandner, Daniel Holk

In this article, we analyze from a legal perspective under which circumstances companies providing specific financial services require regulatory approval. We differentiate in our legal assessment between (i) finance leasing, (ii) factoring services, and (iii) sales financing. Furthermore, we offer suggestions for the practical implementation. The article assumes the application of German laws.

Preamble

This article is the third publication of the series “legal aspects of blockchain technology” by the Frankfurt School Blockchain Center (FSBC), Datarella, and CMS Hasche Sigle. This research is part of the KOSMoS project, a research project funded by the German Federal Ministry of Education and Research (BMBF) under the funding code 02P17D020. The Frankfurt School Blockchain Center gGmbH and Datarella GmbH are part of the “KOSMoS” consortium. Together with partners from the industry (Schwäbische Werkzeugmaschinen GmbH, Alfred H. Schütte GmbH & Co. KG, ASYS Automatisierungssysteme GmbH), academia (Universität Stuttgart, Hochschule Furtwangen), and software development (inovex GmbH, Ondics GmbH), they create a blockchain-based solution allowing manufacturing companies to establish a DLT-based framework for producing machines in order to (a) execute dynamic leasing contracts, (b) provide transparent maintenance documentation and © ensure high-quality documentation of manufactured products. …


Authors: Alexander Bechtel, Jonas Gross, Philipp Sandner

The European Central Bank (ECB) has recently published a report on the digital euro. The report defines scenarios under which a digital euro will be introduced and specifies principles and requirements a digital euro would have to comply with. In this article, we evaluate the ECB’s report and discuss its three most important aspects that should help with the interpretation of the report.

Summary of the report

On October 2, 2020, the European Central Bank (ECB) published its long-awaited report on the digital euro, a central bank digital currency (CBDC) for the euro area. The ECB addresses the topic against the background of its mandate. Therefore, it intends to create a digital form of cash for European citizens rather than a programmable form of money for the European industry. We argue, however, that in its current form outlined in the report, the ECB’s digital euro lacks core features of physical cash such as being token-based, not remunerated, and anonymous. …


Authors: Markus Kaulartz, Jonas Gross, Constantin Lichti, Philipp Sandner, Daniel Holk

In this article, we analyze from a legal perspective whether a smart contract can replace a physical contract set up between various business parties. We differentiate in our legal assessment between 1) the smart contract itself being the text of the contract, and 2) the smart contract only being used to execute a contract concluded elsewhere. Furthermore, we offer suggestions for the practical implementation. The article analyzes German laws.

Preamble

This article is the second publication of the series “legal aspects of blockchain technology” by the Frankfurt School Blockchain Center (FSBC), Datarella, and CMS Hasche Sigle. This research is part of the KOSMoS project, a research project funded by the German Federal Ministry of Education and Research (BMBF) under the funding code 02P17D020. The Frankfurt School Blockchain Center gGmbH and Datarella GmbH are part of the “KOSMoS” consortium. Together with partners from the industry (Schwäbische Werkzeugmaschinen GmbH, Alfred H. Schütte GmbH & Co. KG, ASYS Automatisierungssysteme GmbH), academia (Universität Stuttgart, Hochschule Furtwangen), and software development (inovex GmbH, Ondics GmbH), they create a blockchain-based solution allowing manufacturing companies to establish a DLT-based framework for producing machines in order to (a) execute dynamic leasing contracts, (b) provide transparent maintenance documentation and © ensure high-quality documentation of manufactured products. …


Authors: Alexander Bechtel, Jonas Gross, Philipp Sandner, Victor von Wachter

“Programmable money” is, without doubt, one of the major buzzwords in the blockchain space in 2020. Even though everyone seems to talk about it, we still lack a clear definition and hence common understanding of this term. In this article, we present a taxonomy of programmable money. In particular, we argue that “programmable money” has to be differentiated from “programmable payments”. …


Authors: Philipp Sandner, Jonas Gross, Philipp Schulden, Lena Grale

On July 29, 2020 the Frankfurt School Blockchain Center published a working paper that sheds light on the perception of payment initiatives by interviewing more than 50 senior experts. In this study, we analyze the impact of digital programmable Euro initiatives, such as the Libra stablecoin, and CBDCs, on banks. We find that both Libra and a Euro CBDC might heavily affect European banks. With this article, we provide a summary of the study’s research results. The PDF document can be found here.

Introduction

Existing payment systems get more and more disrupted. As a consequence of the global trend of digitizing payments and generating new business models from the use of blockchain-based digital programmable money, several new payment initiatives have been announced recently. Besides “classical” crypto assets, also stablecoins become increasingly important. The announcement of the Facebook-initiated Libra stablecoin is mainly perceived as a game-changer for the financial sector. Today, also central banks discuss the introduction of their own digital currencies, so-called CBDCs. To date, these payment innovations are not sufficiently discussed and analyzed from the perspective of different sectors and industries, as its implications remain unclear since most initiatives have not yet been introduced. At this point, the literature does not sufficiently discuss the implications of these innovations on the financial sector. This paper sheds light on the perception of these payment initiatives by interviewing more than 50 senior experts. In this study, we analyze the impact of digital programmable Euro initiatives, such as the Libra stablecoin, and CBDCs, on banks. We find that both Libra and a Euro CBDC might heavily affect European banks. Experts fear that large-scale financial disintermediation of the financial sector could take place, and digital bank runs could be triggered. Besides these risks, our findings suggest that banks also have the opportunity to develop new business models stemming from these initiatives. Therefore, Libra and a CBDC Euro should not only be seen as threats but also as opportunities. …


Authors: Markus Kaulartz, Jonas Gross, Constantin Lichti, Philipp Sandner

This article addresses the question how a blockchain transaction must be structured so that it can be used as evidence in court. Based on the following different types of formal evidence — namely (1) expert opinion, (2) documents/deeds, (3) inspection or visual evidence, and (4) witnesses and party hearings — we analyze the evidence assessment of a blockchain transaction in detail. The article analyzed the laws and rules of the jurisdiction of Germany.

Preamble

This article is the first publication of the series “legal aspects of blockchain technology” by the Frankfurt School Blockchain Center (FSBC), Datarella and CMS Hasche Sigle. This research is part of the KOSMoS project, a research project funded by the German Federal Ministry of Education and Research (BMBF) under the funding code 02P17D020. The Frankfurt School Blockchain Center and Datarella GmbH are part of the “KOSMoS” consortium. Together with partners from the industry (Schwäbische Werkzeugmaschinen GmbH, Alfred H. Schütte GmbH & Co. KG, ASYS Automatisierungssysteme GmbH), academia (Universität Stuttgart, Hochschule Furtwangen), and software development (inovex GmbH, Ondics GmbH), they create a blockchain-based solution allowing manufacturing companies to establish a DLT-based framework for producing machines in order to a) execute dynamic leasing contracts, b) provide transparent maintenance documentation, and c) ensure high-quality documentation of manufactured products. …


On July 23, 2020, the FinTech Council of the German Federal Ministry of Finance (German: FinTechRat des Bundesministerium der Finanzen) published a statement about the digital, programmable Euro. With this article, we provide an unofficial translation of the German version of the paper with the goal to make the content also available to non-German speaking readers. More information can be found on the website of the German Federal Ministry of Finance. The PDF document can be found here. — Authors of the unofficial translation: Philipp Sandner, Jonas Gross

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Abstract

The purpose of this document is first to define the term ‘digital, programmable Euro’. Due to the increasing demand for a programmable Euro, we explain the reasons why the programmable Euro is beneficial e.g. for the industry and end users. The main benefits are increasing efficiency in cross-border payments, automation, integration of delivery versus payment in one platform, and enabling micropayments. The use of the programmable Euro is particularly beneficial in the context of the machine economy — the next stage of the digital transformation — especially for Germany (keywords: autonomous driving, Industry 4.0, Internet of Things). In the following, different approaches are presented how the digital, programmable Euro could be issued and implemented. Here, variants of central bank digital currencies (CBDCs) play a role as well as the programmable Euro issued by private institutions, such as commercial banks, e-money institutes, or unregulated entities. …


Authors: Anna Maria Bracio, Jonas Gross

Central bank digital currencies (CBDCs) more and more approach reality. One special form of a CBDC is a synthetic CBDC (sCBDC). In such a setup, the CBDC system is not directly managed by the central bank, but a wide range of tasks is outsourced to private companies, such as e-money institutes. In the case of such a private public partnership, financial institutions fully back e-money with riskless central bank money. This results in a synthetic CBDC, a digital form of (e-)money that is fully backed by riskless central bank money. …


Authors: Jonas Weisbrodt, Jonas Gross

Central bank digital currencies (CBDC) are currently a hot topic. A study by the Bank for International Settlements (BIS) from January 2020 shows that 80% of worldwide central banks are engaged in CBDC-related research (Boar et al. 2020, p. 3). The percentage of central banks that run experiments or proofs-of-concept is also growing, reaching almost 50%. 10% of the surveyed central banks plan to introduce a generally available (retail) CBDC in the next three years and 20% in the next six years (ibid., p. 7). …

Jonas Gross

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