Only a fraction of German companies use blockchain in their daily practice. Does blockchain technology create more problems than solutions? Or does the decentralized system actually hold untold opportunities? How do companies benefit from stablecoins and DeFi? And how can blockchain solutions be implemented in German SMEs? Technology expert Franz A. Wenzel, Director at enomyc, answers burning business questions.
Mr. Wenzel, critics claim that blockchain creates problems for solutions. What is your view on this?
I have to smile at that. If everything were perfect in German SMEs, there would be no reason to face new challenges. The current market conditions are already bringing many new tasks with them. It is understandable that additional topics such as stablecoins, crypto assets, blockchain, and MiCA are initially met with resistance. But at the same time, the fact is that blockchain technology is here to stay. It has become a global market segment with a volume of several trillion dollars, and it continues to grow. In Germany, much of this is still very much in the theoretical stage.
What is blockchain?
Blockchain is not Bitcoin, not Ethereum, not supply chain management. Blockchain does not replace systems such as ERP. It is a so-called protocol that serves as the basis for various applications and solutions. It extends existing systems and is the underlying code that enables users and applications to build stability, trust, and integrity through the so-called trustless protocol.
The keyword “trust” is interesting. When listening to users of blockchain technologies, for example a consortium of companies, transparency and trust often only become possible through blockchain.
This is exactly the right approach, because no medium-sized company trusts others blindly from the outset. However, if companies rely on blockchain as an immutable shared database, trust becomes almost superfluous. This is because blockchain ensures that once information has been recorded, it cannot be changed. This immediately addresses the problem of lack of trust. At the same time, data and transactions are documented in a tamper-proof manner. This makes fraud and, above all, errors more difficult. As management consultants, we often encounter errors or inconsistencies that can only be detected through time-consuming evaluations. With a blockchain-based application, these evaluations can be created automatically and transparently. This provides a single point of truth, ensuring transparency and trust.
Which industries benefit most from blockchain technology?
Certainly finance and accounting. In logistics and supply chain management, blockchain technology makes supply chains traceable. Manufacturing, mechanical engineering, and the automotive industry are very far ahead. Most medium-sized companies work with large OEMs in these areas. Studies from 2024 show that 12 percent of manufacturing companies use blockchain technology or plan to use it, while another 24 percent are discussing its use. This is a development – from passive awareness to active strategic engagement – and it makes it clear that the technology is a tamper-proof method for large global players with their highly complex supply chains. Why? Because it ensures traceability, quality assurance, transparent accounting, and much more.
Which other industries does this apply to?
Energy suppliers and energy trading. Regional utilities and energy startups experimented with blockchain technology early on. This enabled them to build peer-to-peer networks with electricity trading platforms and manage certificates of origin in accordance with the EEG law. The EEG has been amended several times and the requirements for certificates of origin have become more stringent. Blockchain solutions help to implement these requirements in a transparent and traceable manner. Blockchain enables a truthful representation of all relevant data without the need for an audit, an auditing company, a bank, or a notary. All of this happens through the technology—if it is used correctly.
You have mentioned the word “without” very often: “without an audit, without an auditing company, without a bank or a notary.”
Yes, blockchain makes many things simple, efficient, and cost-effective. At this point, I would like to elaborate on two more points: stablecoins and DeFi. DeFi stands for decentralized finance. Stablecoins are tokens. Tether, for example, is a stablecoin, a cryptocurrency that was specifically developed to maintain as stable a value as possible. It is pegged 1:1 to a real fiat currency, in this case the US dollar (USDT) or the euro (EURT). A medium-sized company that trades globally can save on currency exchange fees caused by fluctuating, unstable exchange rates – provided, of course, that its trading partners also accept stablecoins, the value remains stable, and there are no regulatory hurdles in the respective country.
Are stablecoins already gaining acceptance in supplier and payment processes?
I recently spoke with several suppliers about their terms and payment targets, and they reported that their payments are made in Tether (USDT). To this end, their clients now work with a company wallet. They have upgraded their systems to a level that allows them to continue working with reliable suppliers on their terms of payment. This is not a new phenomenon and brings various advantages to companies.
How do companies benefit specifically from DeFi solutions in international finance? What new opportunities does this create—beyond established banks and brokers?
Decentralized finance, built on blockchain technology, gives companies direct access to investors. They can also achieve a broader investor base with lower minimum amounts. This means that even small bonds can be issued digitally. In the past, banks or brokers acted as intermediaries for loans. With DeFi, many small investors can now lend money together. This makes each individual part of a virtual bank. The technical infrastructure requires fewer interfaces. This saves costs and administrative effort. The earmarked use of funds can also be made more transparent through programmable tokens, such as smart contracts: investors know what their capital is being used for.
What effect do these technological developments have on banks? Are they becoming redundant? Some of their functions seem to be losing importance.
Banks are indeed losing parts of their traditional business, albeit gradually. Many are therefore positioning themselves as cooperation partners. Especially since the European securities law, the Markets in Crypto-Assets Regulation (MiCA), has largely come into force, all major banks have become more active. Among other things, MiCA regulates DeFi, tokens, and crypto exchanges that are active in Europe. However, I have also observed that banks are now investing heavily in blockchain consortia. They offer custody solutions for digital assets. They also participate in platforms such as WeTrade, Marco Polo, and the associated blockchain network for trade finance. Kfw and Commerzbank have simulated the issuance and trading of such a security completely digitally via a blockchain in pilot projects. I find that very commendable. Nevertheless, reactions remain mixed. Some banks are hesitant, while others are taking action so as not to be left behind.
So the banks' strategy is to collaborate with fintechs, DeFi projects, and other new players. At the same time, however, banks continue to position themselves as traditional financiers?
Yes, and that's a great opportunity. Because, if used correctly, SME banks could use DeFi platforms to create marketplaces through which their corporate customers can obtain liquid funds from institutional investors. The banks take on the task of vetting the companies, thereby building trust, but continue to earn money via a blockchain-based infrastructure. As routine tasks such as payment transactions and simple loans become increasingly automated, banks need to reinvent themselves and integrate technologies such as stablecoins to a greater extent. Examples such as Stripe, Visa, and Mastercard show how stablecoins are already being used in global payment processes.
What are the specific practical advantages for SMEs?
Small and medium-sized enterprises benefit above all from significantly lower barriers to market entry. Today, they can test stablecoins for fast international transfers with little effort. It is important to choose suitable and trustworthy stablecoins, such as USD Coin and, soon, regulated euro stablecoins, while paying attention to price stability and regulatory standards.
That all sounds fundamentally optimistic. What are the risks?
From my perspective, ignorance is the greatest risk, and it often results in costly lessons learned. Still, this should not cloud the mindset of experimentation. That is why I also find the developments and offerings from banks so positive. It looks quite different, however, with crypto exchanges such as Binance, Coinbase, Kraken, and especially FTX, which collapsed in 2022 due to fraud scandals. Such scandals naturally fuel distrust. But when regulated, government-supervised financial instruments are available, companies and customers can explore blockchain-based offerings more securely and with greater confidence.
What role does regulation play through the already mentioned MiCA, but also the eWpG, the Electronic Securities Act since 2021: blessing or curse?
MiCA and eWpG, for the first time, create a clear framework for crypto assets and blockchain applications. In the short term, this means additional effort for companies. There is no way around that. It is necessary to integrate new requirements and, if applicable, obtain new approvals. For example, there is a requirement that companies issuing certain crypto tokens must publish a white paper and secure authorizations. The eWpG requires, in the case of issuance, either a notification to a central register or the maintenance of an in-house crypto securities register with a BaFin license. That did not exist before. However: this bureaucracy is targeted, it partly replaces old bureaucracy – and it is digital. Previously, for a corporate bond, a physical global certificate had to be deposited as a paper deed and notarized. Thanks to the eWpG, this can now be dispensed with: securities are now issued fully electronically and maintained in an electronic register or on a blockchain. This saves time, notary costs, and facilitates trading.
What effect does this legislation have on the use of blockchain and crypto applications?
The legislation creates, overall, a reliable framework. That is the key to the entire matter. One can also feel in the market that a lot has shifted due to MiCA and the eWpG. The legislation has created a very positive signaling effect: blockchain and crypto should not be banned but made usable. That makes many things easier, also mentally. In Europe, the larger authorities and banks now have certainty. Medium-sized companies that harbor concerns can now gain more security in the process through legal frameworks. After all, concerns are based not only – aside from cases of fraud – on the complexity of legal texts, the long-term procedures, and the high bureaucratic hurdles, which are now being reduced.
How can established companies now implement their own blockchain solution? Some, like BMW, join forces with experienced startups.
Three observations upfront: the cooperation with startups stems from the by now well-known shortage of skilled professionals. It is now very clear who has acquired sufficient expertise, knowledge, and experience in blockchain over the past years – and also who can competently and compliantly implement and apply it. The next point: we must distinguish between implementing an application that is built on blockchain technology and implementing financial investment strategies in which tokens are used. The latter concern the company’s finance department. And third, and this addresses your question a bit more directly, it is about the creation and implementation of a proprietary blockchain-based solution – that is, building one’s own blockchain network. New wine does not flow effortlessly through old wineskins.
What exactly does that mean?
That companies must examine a great many aspects beforehand – not least employee capacity and expertise. Internal training and education are required. Existing IT systems such as ERP systems, databases, and other applications must provide the appropriate interfaces (APIs) to the blockchain solution. In part, these interfaces do not exist, and there are also no standard plug-ins. Consequently, individual solutions are needed. It is important that interoperability with other systems is ensured. Building on that, processes and organization must then be adapted. Legal and compliance aspects make the process more difficult, since there are regulatory requirements such as the GDPR: a blockchain is fundamentally immutable. Once stored, data cannot technically be deleted or altered. This creates a conflict between GDPR requirements and the technical nature of blockchain. Therefore, legal data protection officers should be involved early. They must decide on cryptographic principles such as Zero Knowledge Proofs.
What are the subsequent first steps?
Start, rather than remain stuck in theory. I recommend companies plan a clear pilot project, measure it continuously, and readjust repeatedly. This is possible once a first functional prototype, a Minimum Viable Product (MVP), is available. The MVP does not have to be perfect for this. To gain initial real-world experience – whether with regulatory instruments or technical infrastructure – it is sufficient to have an MVP that meets the minimal requirements. Step-by-step integration is the recipe for success. It must be approached in a modular way. But it should be clearly defined as a pilot project. The aspects mentioned must be handled smartly, and resources must be secured. And, very importantly: no one has to accomplish this alone or walk the path alone. By now, most major law firms offer services and training around blockchain, Web3, or tokenization. At enomyc, we have also developed an excellent seminar-workshop for companies, in which they gain a comprehensive overview of these worlds, including practical exercises.
Research shows what such a pilot project could cost: depending on complexity and internal contribution, medium-sized companies should expect investments between EUR 50,000 and 250,000 – spread over several years.
Correct, these are so-called opportunity costs, which in fact consist of several investment stages. Investments in hardware and IT can amount to the five-figure range and, depending on prototype and scope, even up to EUR 50,000. Beyond that, investments go into consulting, development, and personnel resources. But these figures should not be discouraging, because firstly they extend over several years. Secondly, medium-sized companies have already invested several millions in their ERP systems. When it later turned out that many ERP systems were the wrong ones or had reached their end of life, the switch posed a far greater challenge than the initial implementation. Therefore: start small, then scale over several years. It will take one year until the first savings become visible and up to three years until the break-even point is reached. Everything beyond that moves in the right direction. Even more important is scalability: the more companies use, further develop, and supply a blockchain solution with data, the better the system functions.
One essential recommendation to conclude?
Absolutely build blockchain know-how and skilled professionals within the company – that is worth gold. Because companies that have forward-thinking minds on board not only have experts who think in systems and solutions – they also have people who, in the future, will not limit themselves to blockchain technology alone.
Thank you for the conversation, Mr. Wenzel.
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