German blockchain strategy aims to head off ‘stablecoin’ currencies

By on 10/10/2019
Angela Merkel’s government is keen to make use of blockchain tech, but wary of cryptocurrencies’ potential to dilute governments’ roles issuing and managing currencies. (Image courtesy: Initiative D21)

Germany has published a comprehensive blockchain strategy as the country seeks to be “at the forefront of innovation” – but issued a stark warning on private firms’ attempts to issue digital currencies.

The federal government’s strategy – which is only currently available in German – aims to capitalise on the potential of blockchain and distributed ledger technologies (DLT). Its publication comes as the European Union and national regulators ponder how to regulate much-hyped new projects such as US social media giant Facebook’s planned Libra cryptocurrency.

“We want to be at the forefront of innovation, and we want to reinforce Germany’s position as a leading technology hub. As part of the internet of the future, blockchain technology can play a key role in our efforts. At the same time, it is essential to protect consumers and state sovereignty. One of the core activities of a sovereign state is to issue a currency. We will not cede this task to private companies,” said the country’s finance minister, Olaf Scholz.

Germany’s 24-page blockchain strategy – which is only available in German – was passed by Chancellor Angela Merkel’s cabinet last month, and followed a public consultation in the spring.

Chain reaction

Germany’s government says that it wants the country’s blockchain “ecosystem” to grow, and that it aims to help make Germany “an attractive hub for the development of blockchain applications in business and public administration”.

The strategy outlines Germany’s blockchain priorities, including the development of a digital identity system. The government will explore the benefits of blockchain in use-cases such as maintaining the records of civil status, document registration, passports and ID cards, as well as promoting the testing of blockchain-based verification of higher education certificates.

The strategy’s reference to private companies issuing currencies has been interpreted as a challenge to Facebook’s Libra, a so-called ‘stablecoin’. The German government says it “will work at the European and international level to ensure that new digital means of payment do not become alternatives to official currencies”.

Germany has recently teamed up with France in jointly seeking to stymie Libra, with Germany’s Scholz and his French counterpart, Bruno le Maire, issuing a joint statement last month. The countries have backed the development of a public cryptocurrency.

David Marcus, chief executive of Facebook’s digital financial services subsidiary Calibra, said on Twitter in September that “Libra is designed to be a better payment network and system running on top of existing currencies, and delivering meaningful value to consumers all around the world’.

He added: ‘We will continue to engage with central banks, regulators, and lawmakers to ensure we address their concerns through Libra’s design and operations.’

It was reported this week by the Financial Times that the European Commission has asked Facebook and the Libra Association – the entity managing the Libra project – to respond to questions on financial stability, money laundering and data privacy risks.

Catch up briefing

A blockchain is a decentralised, distributed and public digital ledger used to record transactions across many computers, so that any involved record cannot be altered without the alteration of all subsequent blocks. Transactions are grouped in blocks, recorded one after the other in a chain of blocks: the ‘blockchain’.

The first major application of blockchain was Bitcoin, which was released in 2009. Bitcoin is a cryptocurrency and the blockchain is the technology that underpins it. Within financial services, other potential uses include speeding up and simplifying cross-border payments, and improving online identity management. Blockchain also has fields of application in sectors such as healthcare – for example, in managing medical records – and logistics.

About Ian Hall

Ian is a former editor of Public Affairs News (2007-2011), who has most recently worked as UK director for the pan-European media network Euractiv (2011-2018). He is also a former news editor of PR Week (2000-2007). He was shortlisted for ‘Editor of the Year’ at the British Society of Magazine Editors (BSME) Awards in 2010. He began his career in Bulgaria at English-language weekly the Sofia Echo. Ian has an MA in Urban and Regional Change in Europe and a BA in Economics, both from Durham University.

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