Deutsche Bank, Germany's largest bank by total assets, is investigating the release of Ethereum layer-2 to address compliance issues for financial institutions.
This is according to s report from Bloomberg today. In particular, the layer-2 network will be especially useful for mainstream financial institutions that want to get into blockchain but are hindered by compliance concerns.
The purpose of the Dama 2 project
Called Project Dama 2, the initiative aims to improve trading efficiency while ensuring stricter regulatory compliance for financial institutions.
Public blockchains, such as Ethereumholds great promise for asset tokenization and improving operational efficiency. However, they may present compliance challenges for regulated entities, including the risks of interacting with unauthorized or controlled entities.
To address these issues, Deutsche Bank's Layer-2 solution connects to Ethereum and uses ZKsync technology to enable more efficient and cheaper transactions.
Boon-Hiong Chan, head of applied innovation for Deutsche Bank in the Asia-Pacific region, said the Layer-2 framework enables banks to design a list of specific verifiers for digital asset transaction processing.
In particular, this method improves compliance by ensuring only approved organizations are involved in verification. In addition, the platform is designed to provide regulators with specific oversight capabilities, allowing them to monitor funding movements when needed.
For context, Project Dam 2 is part of the Monetary Authority of Singapore (MAS) Project Guardian, a program that brings together 24 major financial institutions to explore the tokenization of blockchain-based assets.
Mediation risks?
Deutsche Bank's participation confirms its commitment to the use of blockchain to increase operations while adhering to strict regulatory standards. The bank plans to release the lower rate the product of the platform next year, subject to regulatory approval.
However, the project's design, which includes custodial validators and special supervisory rights for administrators, raises concerns among blockchain enthusiasts who value decentralization as main principle.
With the decision to give managers “Super administrative rights” and limiting transaction verification to approved entities, the initiative could undermine the open and permissionless nature of blockchain.
Deutsche Bank warms up to Crypto and Blockchain
At the same time, this development is not Deutsche Bank's first investigation into blockchain and digital assets. In June 2024, the bank partner with Austrian crypto broker Bitpanda to facilitate cryptocurrency transactions for their clients.
This collaboration enabled Deutsche Bank customers in Germany to buy and sell cryptocurrencies through internal transfers, simplifying the investment process in digital assets.
Additionally, Deutsche Bank has been investigating crypto custody services. In May 2024, reports confirmed that the bank plans to offer digital asset custody solutions, aiming to provide secure storage for cryptocurrencies and other digital assets.
Previously, last June, Deutsche Bank applied with the German regulator Bafin to obtain a license to hold digital assets. Recently, Deutsche Bank Inc a coalition with leading exchange Crypto.com to help the platform strengthen banking support in the Asia Pacific (APAC) region.
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Source: https://thecryptobasic.com/2024/12/18/germanys-largest-bank-deutsche-bank-to-launch-an-ethereum-layer-2-for-financial-institutions/?u tm_source=rss&utm_medium= rss&utm_campaign=Germany's-largest-bank-deutsche-bank-to-launch-ethereum-layer-2-for-financial-institutions
