Deutsche Bank Says Tokenization Is The Future Of Financial Innovation

Deutsche Bank, a multinational bank commanding $973.4 billion in assets, is the latest leading financial institution to jump on the tokenization bandwagon.

On May 14, Deutsche Bank joined Project Guardian, a tokenization initiative headed by the Monetary Authority of Singapore. Deutsche Bank will launch a follow-up to its 2023 Digital Assets Management Access (DAMA) project, which explored the issuance and transfer of tokens on the Ethereum blockchain.

Boon-Hiong Chan, Deutsche Bank’s Asia Pacific Head of Securities & Technology Advocacy, told The Defiant that embracing tokenization and staying at the forefront of web3 adoption is key to “future-proofing” the banking sector.

“Staying at the forefront of applicable innovation is critical to future-proofing our industry,” Chan said. “Asset servicers like Deutsche Bank will need to be able to effectively address the different chains that asset managers are likely to use for tokenization, in order to facilitate adoption and foster innovation.”

The news comes as an increasing number of the world’s largest financial institutions are dipping their toe into on-chain finance.

“Asset and fund tokenization hold real potential for financial markets,” Chan continued. “Through collaboration and gaining a deeper understanding of the novel digital ways to represent assets, we look forward to contributing to the progress of the asset and wealth management sectors.”

Earlier this week, S&P Global Rankings, a leading credit rating agency, published a report arguing that tokenization is poised to revolutionize the asset management industry through wholesale efficiency gains.

Chainlink’s Cross-Chain Interoperability Protocol (CCIP) has recently served as key infrastructure facilitating enterprise adoptions of tokenization. CCIP has played a role in tokenization pilots from ANZ Bank, BNY Mellon, Citi, BNP Paribas, Euroclear, Lloyds Banking Group, and SIX Digital Exchange in recent months.

Project Guardian

Deutsche Bank joins 17 institutional Project Guardian participants, including regulators from the United Kingdom, Switzerland, and Japan.

The first iteration of DAMA explored fund issuance and administration, involving participation from asset managers, transfer agents, and custodians, on the Ethereum blockchain.

Project DAMA II will continue to explore the tokenization of digitally represented assets, with Deutsche Bank set to propose “protocol standards and identify best practices” on Layer 2 as part of the program.

Deutsche Bank will deepen its collaboration with Memento Blockchain, a team developing zero-knowledge Layer 2 scaling solutions on Ethereum. The bank will also tap Interop Labs, the founder of Axelar Network — a participant in Project Guardian — for support.

“Secure blockchain interoperability is a requirement to unlock the trillion-dollar potential in asset tokenization,” Sergey Gorbunov, co-founder of the Axelar protocol, told The Defiant. “Deutsche Bank and Project Guardian are leading innovation toward establishing the open systems that will enable this technology.”