Report on the state of digitalization of the German capital market using the example of the first blockchain-based digital KfW bond issues

Report on the state of digitalization of the German capital market

  • Report on the status of digitalisation of the German capital market using the example of the first blockchain-based digital KfW bond issues
  • The analysis is based on practical experience reports from participating players
  • Development of a scalable DLT-based market is essential for Germany’s and Europe’s future competitiveness in the global financial market
  • Systematic development and deepening of digitalisation expertise essential for Germany’s and Europe’s digital sovereignty

Berlin, 27 February 2025

Today, KPMG and KfW are publishing an analysis of the market maturity of the DLT-based capital market in Germany and Europe (distributed ledger technology is the umbrella term for technologies that enable a decentralised and distributed register for storing data). The analysis highlights both the existing framework conditions and the challenges that stand in the way of a successful and scalable implementation of DLT-based capital market transactions. Based on the first two blockchain-based digital KfW bonds issued in summer 2024, KPMG systematically compiled the experiences of the players involved in the issues and structured them together with KfW. The aim is to communicate the necessity and practical implementation of DLT-based transactions to the interested public as practically as possible using concrete field reports. The aim is to encourage everyone to consistently engage with future technologies that are essential for the digital sovereignty of Germany and Europe.

“As one of the most active issuers worldwide, it is important for us to tap into new technologies to increase the efficiency of our capital market refinancing. This is a constant learning process that requires a lot of resources, but also inspires our employees,” explains Tim Armbruster, Treasurer of KfW. “The aim is to use our unique market position to bring together a large number of market players in order to jointly help shape the competitiveness of the German and European capital markets for the future.”

Against the backdrop of the technological paradigm shift, it is crucial that Germany and the EU actively promote the development of a DLT-based capital market in order to strengthen their competitiveness and sovereignty in a digital world. The use and integration of DLT in capital market processes offers immense opportunities for the financial market and can make transactions more efficient and secure. It is therefore important that institutions like KfW move forward in this area.

Jens Siebert

Jens Siebert

Partner, Financial Services

KPMG AG Wirtschaftsprüfungsgesellschaft

The joint publication is characterised by contextual explanations of terms, which – supplemented by a glossary of frequently used DLT terms – make it easier to get to grips with the topic. The evaluative experience reports of the various transaction participants – namely Bankhaus Metzler, Boerse Stuttgart Digital, Cashlink, Deutsche Bank, DZ BANK, Hauck Aufhäuser, LBBW, Linklaters, Union Investment as well as Moody’s Ratings, Scope Ratings and S&P Global Ratings – also make a significant contribution to understanding. In this way, the roles of the various players, some of whom are new to the digital environment, as well as their findings and the resulting recommendations for strengthening the scalability of the DLT-based capital market can be analysed virtually alongside the issue. The ASAP model of the International Monetary Fund (IMF) was used as a conceptual basis for analysing the current level of maturity. Schematics and summaries round off the knowledge transfer.

The insights gained from the analysis make it clear that, for example

  • The Electronic Securities Act (eWpG) from 2021 and the ECB exploration phase of 2024 provide very good foundations that now need to be further developed;
  • The combination of public and private blockchains works and enables very efficient transaction processing
  • The use of DLT has the potential to significantly automate existing capital market processes.
  • At the same time, the report shows which key adjustments need to be made in order to realise the scaling potential of a DLT-based capital market:
  • To build up or strengthen secondary market liquidity, the market segment needs an increasing number of market participants who have not only acquired the necessary expertise, but are also institutionally capable of handling DLT-based digital securities.
  • Central bank money plays a crucial role in the secure and efficient processing of DLT-based digital transactions. In this context, the European Central Bank’s announcement on 20 February 2025 that it will continue to deal with the settlement of these transactions in central bank money as part of a “twin-track approach” is very welcome.
  • The central bank eligibility of DLT-based digital securities is essential for investors so that equal treatment with traditionally issued securities can develop.

Press contact

KPMG AG Wirtschaftsprüfungsgesellschaft

Clemens Reisbeck

Deputy Head of Corporate Communications

KPMG AG Wirtschaftsprüfungsgesellschaft

T +49 89 9282 1722