Behind the Scenes of Deka's Blockchain Strategy

The word “tokenization” is used rather cautiously at Deka when referring to its own blockchain initiatives. It is considered too narrow; Deka prefers a broader, cross-process perspective – “digitization” is therefore the more appropriate term.

And yet, Deka – the securities house of Germany’s savings banks – is one of the tokenization pioneers in the country. As early as 2016, Deka began to closely examine the potential of blockchain technology for its business. The key turning point came with the introduction of the Electronic Securities Act (eWpG) in June 2021, which enabled the digital issuance of securities.

“Blockchain technology will fundamentally reshape the financial system. That’s why we started early to develop our own infrastructure. But it was the Electronic Securities Act that gave the decisive push – suddenly, we were able to issue digital products directly on-chain."
Marion Spielmann, Head of COO Banking & Custody

Since then, Deka has not only tokenized and successfully issued a wide range of financial products, but has also laid key regulatory and technological groundwork for the future. One example: the launch of its own blockchain infrastructure, later spun off under the name SWIAT, which now operates as a joint venture with partners like LBBW and Standard Chartered.

In addition, Deka is planning to launch a tokenization platform alongside its crypto custody business. In June, the company became the first bank to receive a full license to operate a crypto securities register. Until then, this business had been conducted under a preliminary license. A crypto custody license is also expected to follow soon.

Spielmann’s goal is to “cover the entire value chain of a digital product” and offer Sparkasse clients innovative financial instruments. What may now look like a meticulously executed five-year plan is in fact the result of continuous exploration to “safeguard the future of our business model.”

We wanted to better understand what Deka has learned throughout this exploration, what the next stages of its blockchain strategy look like, and what best practices the company has established internally to prepare its 5,000+ employees – and the broader Sparkassen network – for blockchain adoption. For this, we sat down with Marion Spielmann and two Digital Assets Product Owners: Andreas Sack, responsible for infrastructure, and Ernesto Pereira, responsible for digital financial products.

Marion, you mentioned that your blockchain initiatives are primarily about securing Deka’s future competitiveness. How do you think this technology will impact your business not only strategically but also financially, especially your P&L? What long-term effects do you expect?

Marion Spielmann: First, it’s important to acknowledge that the initial investments are substantial. During the transformation phase, we’re running two infrastructures in parallel and need to integrate them. At the moment, we’re investing more than we’re earning. But once digital products reach critical mass and establish themselves in the market, we’ll see efficiency gains and positive effects on our P&L. It’s still hard to estimate how large those effects will be. Part of the savings can then be passed on to our clients.

With the eWpG and blockchain technology, the value chain in securities markets is changing. Is this an opportunity for you to take on additional parts of the infrastructure yourselves?

Andreas Sack: The eWpG is seen by some market participants as a threat and by others as an opportunity to enter the market. Why? Because blockchain is, by design, a settlement system, allowing me to carve out parts of the traditional infrastructure. This new ecosystem lets us redefine roles. For us, the focus is on crypto custody – a core service in digital assets – and operating crypto securities registers, which enable the issuance of natively digital assets.

Marion Spielmann: Our guiding principle is to cover the full value chain of a digital product – from issuance and custody to trading. The technology transforms the processes. For example, we no longer need intermediaries like central securities depositories for the settlement of digital securities, which will significantly reduce costs.

Speaking of guiding principles: over the past years, you’ve launched several digital products. What’s your approach to product development?

Ernesto Pereira: At the beginning, we focused on simple use cases to gain practical experience quickly. Now we’re working on building a robust infrastructure for more complex token types, including full lifecycle management. For example, if we tokenize a stock, we also need to handle dividend payments and voting rights seamlessly. That’s what we’re working on.

Our focus is especially on illiquid financial products that can greatly benefit from digitization – like bearer and registered bonds. A good example is the digital Sparkassenbrief, which plays a key role in refinancing for savings banks.

Why are these particularly well-suited for digitization?

Ernesto Pereira: Traditionally, issuing these instruments is a lengthy process that can take up to seven days. Secondary transactions are equally slow, requiring the physical delivery of assignment notifications to the original issuer. By fully digitizing the process, such transactions can now be executed within the same day.

Marion Spielmann: This transforms an illiquid product into a liquid one. The entire transfer process of the certificate can now take place on-chain, drastically speeding up transferability. The faster the transferability, the more attractive the product becomes for investors – which increases liquidity and creates secondary market viability.

Besides lifecycle management, what other product-side topics are you working on?

Ernesto Pereira: We’re deeply involved in ECB trials, where we test the use of wholesale CBDCs in interbank blockchain infrastructure – especially delivery-versus-payment scenarios.

We’ve already completed three transactions using the Bundesbank trigger solution, including the largest eWpG-based issuance to date, and we’re preparing for more. These experiments are especially interesting as they demonstrate how interoperability between different infrastructures can work – in our case, between our asset chain and the Bundesbank’s settlement chain.

We’re also working on market-readiness for various credit tokens and exploring what services tokenization enables that were previously unthinkable in the traditional world.

Why did you initially decide to build your own blockchain infrastructure – SWIAT – to issue your digital products?

Marion Spielmann: The idea was to create an open infrastructure for market participants who share the goal of leveraging the benefits of blockchain in securities business. We chose a permissioned blockchain to ensure clear governance for participants and transparent responsibility for validation and network operation. This environment helps us gain experience and build trust in the technology.

Can you imagine issuing products on public, permissionless blockchains in the future?

Andreas Sack: Whether public or private chains will prevail in the future is still unclear and depends on many factors. For now, it’s up to the issuer. Some prefer issuing on private chains, while others want public chains.

Private chains are a kind of “safe space,” with advantages in terms of regulation and compliance. Public chains shine in retail use cases, where you need secure infrastructure that can handle high volumes and many participants. For institutional use cases, where requirements around regulation, anonymity, and data protection are stricter, private chains make more sense. Both have their strengths, and we’re fortunate to be able to work with both.

What are currently the biggest hurdles to adoption of your digital products?

Marion Spielmann: The biggest challenges still lie in the infrastructure – particularly in the areas of cash on chain and secondary markets, both on the supply and demand sides. Institutional investors, for example, are often only allowed to invest in products that have a liquid secondary market – and that’s not yet the case for digital bonds. So we still need market infrastructure in the form of trading venues. And we need an established market standard for cash on chain.