Last week DZ Bank announced the launch of its institutional digital asset custody platform. The bank has €300 billion ($322bn) in assets under custody, ranking third in Germany to BNP Paribas and State Street. Currently it services crypto securities issued under Germany’s eWpG and related laws where its existing licenses apply. However, it has applied to BaFin for a crypto license and plans to provide cryptocurrency services in the future.
“We assume that within the next ten years a significant proportion of capital market business will be processed via distributed ledger technology (DLT)-based infrastructures,” said Dr. Holger Meffert, Head of Securities Services & Digital Custody at DZ BANK. “In the medium term, we see DLT as a complementary technology to the established infrastructures in the existing capital market processes.”
In February the bank announced a collaboration with Swiss digital asset custody technology firm Metaco (now owned by Ripple). And the bank says it has hired more than a dozen staff internally.
Client demand
When DZ Bank first announced digital custody plans, Meffert shared his views with Ledger Insights. A key driver has been client demand, not least Union Investment, for whom DZ Bank acts as depository bank. Union has been one of the most active asset managers globally when it comes to DLT, investing in most of the European Investment Bank (EIB) bond issuances and several others.
Earlier this year Siemens issued a public blockchain bond in which both Union and DZ Bank were investors. It can now transfer these assets onto its custody platform. Additionally, it participated as custodian in the recent tokenized transaction involving Bankhaus Metzler and Union Investment.
When Meffert spoke to Ledger Insights he was clear about the need for a wholesale digital euro to settle capital market transactions. At the time he said a so-called trigger solution might be acceptable in the short term, but wholesale CBDC is essential. DZ Bank plans to actively participate in the EU’s wholesale pilots for DLT settlement. A wholesale digital euro is one of the three options to be trialed.
