Enabling offline M2M payments with deposit tokens

What are CBMTs?

Let’s start with the basics: what are CBMTs and why are they such an important topic right now?

Sebastian Baierle, Giesecke+Devrient: A commercial bank money token (CBMT) is a digital representation of bank deposits deployed on one or more blockchains or distributed ledgers. They are generally referred to as tokenized deposits. CBMTs complement other digital money forms, like CBDCs and stablecoins, but with a focus on corporate payments. It tokenizes deposits by creating a 1:1 digital equivalent of money held in accounts, allowing programmable, secure, and transparent transactions, often utilizing smart contracts for automation.

Banks maintain full control over issuing and redeeming tokens. Each bank’s token can interoperate with tokens from other banks, ensuring seamless payments across different banks and DLT networks. This interoperability is key to fostering adoption, scalability, and usability.

How do tokenized deposits (CBMTs) help you achieve that goal?

Liv Tschee-Wegert, DZ Bank: Corporate treasurers trust commercial bank money because it is familiar and doesn’t come with the risks associated with alternatives like stablecoins. 

CBMTs can be exchanged for traditional deposits at any time while also enabling programmable payments via smart contracts, peer-to-peer transactions without intermediaries, and atomic settlement. This makes them an effective bridge between traditional financial systems and the new possibilities enabled by DLT.

Alexander Hüsgen, DG Nexolution: First, you have the convenience of paying anytime, anywhere, without relying on an internet connection. It’s just like cash. Then you have the fact that funds can be physically stored in an offline wallet, allowing devices or machines to make payments autonomously, even without an internet connection. This is especially valuable for devices that are in motion, like those in vehicles or in supply chains and production areas where internet access is restricted.

Liv Tschee-Wegert, DZ Bank: Offline CBMT is critical for industries operating in scenarios like remote areas or during network outages where reliable internet access is unavailable. By enabling payment functionality without connectivity, it offers a universal solution for both online and offline environments, enhancing operational efficiency and eliminating the need for alternative offline payment methods.

Sebastian Baierle, Giesecke+Devrient: Businesses often require payments to be processed promptly, whether in production sites, during system outages, or in high-security environments where online access may be restricted. Offline capability supports continuity in supply chains and critical transactions, reducing the risk of delays and financial penalties. It also enables instant settlement in environments where real-time online synchronization is not feasible. This reliability enhances the practicality of tokenized payments, ensuring smooth and resilient business operations.

Collaboration and innovation in CBMT development

How important is collaboration in creating this new ecosystem?

Liv Tschee-Wegert, DZ Bank: CBMT is a collaborative initiative driven by close partnerships between banks, industry stakeholders, and legal experts. We have also actively involved potential customers in its development to ensure the solution is tailored to their specific needs. All the progress we have achieved so far is a direct result of this close collaboration.

How can businesses and the industry benefit from CBMTs?

Sebastian Baierle, Giesecke+Devrient: Tokenizing money provides critical benefits such as near-instant or atomic settlement and the automation of payment workflows, unlocking new use cases. Corporations are more likely to adopt CBMTs because they are issued by trusted house banks, which fosters confidence and trust.

Their ability to bridge the reliability of traditional banking with the technological advantages of tokenization ensures they are well positioned to meet the needs of an evolving financial ecosystem. However, expectations must be managed. While still a relatively new concept, CBMTs will likely require further pilots and iterative development to reach their full potential.

Jacob Decker, Festo: Tokenization provides our customers and partners with the tools to develop innovative business models, particularly in offline environments like the shop floor. It offers a secure and reliable foundation for implementing convenient pay-per-use or licensing options, while also streamlining settlement processes.

We are already exploring the impact of this technology across various applications, including industrial pay-per-use scenarios, offline subscriptions, and more. These models have the potential to enhance efficiency and flexibility, unlocking new opportunities for businesses to deliver value.

What was the main reason Festo decided to engage in this project?

Jacob Decker, Festo: At Festo, we are committed to developing the best automation solutions for our customers. To this end, we are leveraging our open innovation network to access, develop, and validate cutting-edge technology. This project allowed us to explore how tokenized payments could transform industrial processes and create entirely new business models. In collaboration with our project partners, we have assembled a highly innovative team, eager to explore new technologies that could disrupt industrial processes and ensure our customers benefit from the latest automotive innovations.