The leading political party in Germany is proposing to integrate blockchain technology into public services. The initiative is a positive signal, but nothing more – at least for now. The government’s official blockchain strategy is expected in summer 2019.

The CDU, Germany’s leading political party, has proposed to integrate blockchain technology into public services. The center-right party published a report including concrete suggestions to use blockchain for administrative services, document protection, and registration.

MP Thomas Heilmann, a co-author of the report, says, “Germany cannot miss another digital revolution. If we create the right framework now, we can take a global lead in blockchain applications.”

Bundes-Chain and digital Euro – Bundesbank to play an active role

The report includes several suggestions. One is the development of a so-called “Bundes-Chain,” a government-run blockchain that private businesses can use to develop their own applications. “The government provides roads,” says Heilmann. “Why not also providing IT-infrastructure?”

The CDU wants the German central bank, the Bundesbank, to play an active role in the build-up of national blockchain infrastructure. The Bundesbank should be the entity to run the Bundes-Chain.

In a subsequent step, this infrastructure can be used to develop a national stablecoin. The report reads, “Central banks should issue a crypto token to private banks, which can be managed just like conventional central bank deposits.”

Creation of a digital corporate entity and tokenized ownership rights

The report also proposes to create a blockchain-based digital corporate legal entity. Heilmann says, “Introducing the Public Limited Company in the 19th century has enabled corporations to build railways. It’s time for the next step.”

A digital corporate entity could use tokens to transfer ownership rights, issued by specialized notaries. That, together with the introduction of blockchain-based bonds, could enable start-ups, investment firms, and software companies to benefit from new financing alternatives.

The idea of tokenizing corporate ownership is not new, and several private companies have already started to work on such concepts. However, the legal framework is still missing in Germany.

Digital identity for individuals and machines

The CDU also suggests creating a blockchain-based digital identity. “Germany can and should set the standard for digital identity,” reads the report. Such a system should be made available for Germans as well as foreign citizens. Foreigners could apply for a digital identity in embassies and consulates abroad.

Moreover, machines and devices could receive a digital identity as well, making it possible to identify a machine uniquely. This could enhance security and lead to improved machine-to-machine communication within the Internet of Things.

Outlook: Only suggestions, the official blockchain strategy is yet to come

The suggestions of the CDU could be a step forward for Germany’s blockchain ecosystem. But at this point, they are merely suggestions. While it’s a good signal that the leading political party supports the build-out of a blockchain ecosystem, the CDU won’t be able to drive innovation by themselves.

Others are less supportive. The idea of a digital Euro has so far not been met with euphoria among central bankers in Europe. The ECB declined a comment, stating that “it does not comment on individual party statements.” Bundesbank Head Jens Weidman said earlier this month blockchain is no breakthrough technology and does not offer any advantages compared to other technologies.

Jens Zimmermann, the digital expert from the SPD, the second largest political party in Germany, says, “It does not make sense to force blockchain adoption if there are other good technologies and database solutions.” He adds blockchain should not become a buzzword but to create sustainable solutions. He also points towards the energy consumption of the Bitcoin network.

Philipp Sandner from the Blockchain Center at Frankfurt School of Finance and Management says the document goes into the right direction but is not as comprehensive as Liechtenstein’s Blockchain Act.

Florian Glatz, President of the German Blockchain Association, says while the paper stresses many essential points, it remains to be seen what the official blockchain strategy of the German government will eventually include. This strategy is expected in summer 2019.

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