Deutsche Bank, Germany’s largest lender, is reportedly developing its own layer-2 blockchain on Ethereum

Deutsche Bank, Germany’s largest bank, is reportedly developing its own layer-2 (L2) blockchain on Ethereum, utilizing ZKsync technology to address the compliance challenges of using public blockchains in regulated finance.

This L2 solution, part of Project Dama 2, aims to enhance transaction efficiency and ensure regulatory safeguards while directly integrating with Ethereum, according to Bloomberg.

Project Dama 2 is part of the Monetary Authority of Singapore’s Project Guardian, which brings together 24 financial institutions to explore blockchain-based asset tokenization.

Implications for the Financial Sector:

Deutsche Bank’s approach includes the use of trusted validators and special oversight for regulators, reducing risks like interactions with sanctioned entities. The platform is designed to ensure transparency while meeting financial compliance standards.

This initiative signals Deutsche Bank’s effort to leverage blockchain technology while overcoming regulatory challenges, potentially encouraging other institutions to adopt similar solutions for asset servicing.

If successful, Deutsche Bank’s project could pave the way for more financial institutions to engage with decentralized networks, Bloomberg reported.

While the bank aims to release a minimum viable product of the platform in 2025, securing regulatory approval will be a crucial step before the L2 blockchain can be launched.

Why L2 Blockchain?

L2 blockchains function on top of primary layer-1 networks like Ethereum, offering faster and more cost-effective transactions.

The technology includes regulatory features such as "super admin rights," allowing financial regulators to monitor and audit transactions as needed.

Partnership with Crypto.com:

On December 10, Deutsche Bank formed a partnership with cryptocurrency exchange Crypto.com to provide corporate banking services in the Asia-Pacific region, including Singapore, Australia, and Hong Kong.

Deutsche Bank offers fiat-to-crypto exchange services and cross-border trading for crypto companies, among other banking services, and has hinted at expanding its partnerships to the UK and other European nations.

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