Blockchain and Smart Contracts in The Financial Sector: Opportunities, Risks, and Regulatory Challenges – a Case Study of Germany

Authors:

Pages: 130-142
DOI: https://doi.org/10.54664/JWXF7598

Abstract:

The financial sector is shifting from centralised intermediation towards decentralised architectures enabled by blockchain and smart contracts. This paper examines their impact on financial intermediation, using Germany as a case study. Combining theoretical analysis with empirical evidence, it identifies a transition from an early focus on payment efficiency to a broader trust-based infrastructure centred on tokenisation, identity management, and interoperable data exchange. The findings show important operational benefits, including faster settlement and lower transaction costs, but also reveal a persistent German adoption gap: high strategic recognition of blockchain coexists with limited operational deployment. The study further identifies major barriers, including software vulnerabilities, oracle dependence, and jurisdictional uncertainty. It concludes that blockchain-based finance requires a hybrid governance model that combines technological automation with legal certainty, regulatory oversight, and institutional trust.

Keywords:

Blockchain technology; Smart contracts; Financial intermediation; Germany; Decentralised finance (DeFi); Tokenisation; Regulatory challenges; Legal liability; Digital trust; MiCA.

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