Deutsche Bank, one of the largest banking institutions in Germany, is making significant strides in the world of blockchain technology. According to a recent report by Bloomberg, the bank is in the process of building a Layer 2 on the Ethereum network as part of an asset-servicing pilot project called Dama 2. This initiative is aimed at helping financial institutions navigate regulatory challenges when incorporating public blockchains into their operations.
The decision to build a Layer 2 on Ethereum comes as a response to concerns within the financial industry about the risks associated with using public blockchains. Boon-Hiong Chan, Deutsche Bank’s Asia-Pacific industry applied innovation lead, highlighted the potential risks of interacting with criminals or sanctioned entities within the blockchain ecosystem. By creating a Layer 2, the bank hopes to address these regulatory concerns and provide a more secure environment for financial transactions.
Chan also emphasized the potential benefits of using a Layer 2 on Ethereum, such as the ability to curate a more bespoke list of validators for processing digital-asset transactions and earning rewards. Additionally, regulators could be given “super admin rights” to monitor fund movements within the blockchain and identify illicit transactions.
Project Dama 2 is part of a larger initiative called Project Guardian, led by the Monetary Authority of Singapore, which aims to explore the tokenization of assets using blockchain technology. Deutsche Bank’s collaboration with crypto firms Memento Blockchain and Interop Labs, as well as the use of ZKsync technology, demonstrates the bank’s commitment to innovation in the crypto sphere.
This move by Deutsche Bank is part of a broader trend within the banking industry towards exploring the potential of blockchain technology. By joining forces with other major financial institutions in Project Guardian, Deutsche Bank is positioning itself at the forefront of this technological revolution.
As the bank awaits regulatory approval for its Layer 2 project, it is clear that Deutsche Bank is determined to leverage the power of blockchain technology to enhance its services and stay ahead of the curve in the rapidly evolving financial landscape. With the launch of the minimum viable product expected next year, the banking industry will be watching closely to see how Deutsche Bank’s foray into the world of Ethereum-based Layer 2 technology unfolds.