• Report on the state of digitalisation of the German capital market using the example of the first blockchain-based digital KfW bond issues
• The analysis is based on reports from stakeholders involved regarding their practical experience
• Developing a scalable DLT-based market is essential for the future competitiveness of Germany and Europe in the global financial market
• Systematic development and consolidation of digitalisation expertise is indispensable for the digital sovereignty of Germany and Europe

Today, KPMG and KfW have published 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 has shed light on both the existing framework conditions as well as the challenges that stand in the way of the successful and scalable implementation of DLT-based capital market transactions. Using the first two blockchain-based digital KfW bonds from summer 2024 as a basis, KPMG systematically compiled the experiences of the stakeholders involved in the issues and structured them together with KfW. The aim is to demonstrate both the necessity and the practical implementation of DLT-based transactions to the interested public, based on concrete experience reports. The ultimate goal is to promote widespread openness for using technologies of the future on a consistent basis, which are essential for the digital sovereignty of Germany and Europe.

“As one of the most active issuers in the world, it is important to us to tap into new technologies to increase the efficiency of our capital market refinancing. This is a continuous learning process that requires a lot of resources, but which our staff are finding very exciting”,

explains Tim Armbruster, Treasurer at KfW.

“Our aim is to leverage our unique market position in order to bring together a large number of market players and in turn help to ensure that the German and European capital markets remain competitive in the future.”

“In light of the technological paradigm shift, it is crucial that Germany and the EU actively drive 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 into capital market processes offers ample opportunities for the financial market and can make transactions more efficient and secure. It is therefore important that institutes such as KfW go ahead in this area”,

says Jens Siebert, Partner, Financial Services, KPMG.

A key feature of the joint publication is the contextual explanation of terms, which – supplemented by a glossary of frequently used DLT terms – make it easier to get started with the topic. The evaluative experience reports of the various transaction stakeholders also significantly help with understanding. The stakeholders were: 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. In this way, it is possible to see which roles the various stakeholders had, some of whom were new to the digital environment, as well as their findings and the resulting recommendations for strengthening the scalability of the DLT-based capital market, alongside the issuances. The ASAP model of the International Monetary Fund (IMF) was used as a conceptual basis for the analysis of the current maturity level, while the reports were supplemented by diagrams and summaries.

Below are some of the report’s findings:

• The Electronic Securities Act (eWpG) of 2021 and the ECB exploratory work of 2024 provide a very good basis, which now needs to be further developed
• The combination of public and private blockchains works and enables highly 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 leverage 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 also have the institutional capacity to work with 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 of 20 February 2025 that it will continue to deal with the settlement of these transactions in central bank money as part of a ‘two-track approach’ is very welcome.
• The central bank eligibility of DLT-based digital securities is essential for investors, to ensure that over time they can be handled in the same way as securities that are issued via traditional methods.

Please find an extract of the joint analysis of the respective websites of KPMG and KfW; the full joint analysis will be available shortly there.