Blockchain
Deutsche Bank tests Ethereum-based platform to mitigate margin squeeze
German banking giant Deutsche Bank AG sees blockchain technology as a means to mitigate margin squeeze.
A new report suggests that Deutsche Bank is testing an unnamed Ethereum-based platform. According to the bank, the platform offers services focused on tokenized funds.
Tokenization is the process of creating blockchain-based representations of real-world assets. Citigroup Inc. estimates the tokenization market could reach $5 trillion by 2030, covering bonds, property and private equity.
The bank will leverage this platform to offer recordkeeping services to help issuers of tokenized funds manage investor information. The platform is also interoperable, ensuring that any fund manager can use it regardless of the underlying blockchain.
According to Anand Rengarajan, head of securities services and global head of sales for Asia-Pacific and Middle East at the bank, by using blockchain and smart contract-based solutions, the German banking giant can reduce costs, transaction times and overall risk.
“It will help us stay relevant, because with the kind of margin squeeze affecting the entire financial services industry, the only way to survive is to innovate,” Anand She said.
Margin compression refers to the reduction of financial services profit margins due to rising costs, regulatory pressures and increased competition.
The project currently remains a proof of concept, but the bank plans to commercialize it in the future.
“The investment we will make in the next two to three years and what we have done in the last two to three years should pave the way for a good business future,” Anand added.
The platform is part of Monetary Authority of Singapore (MAS) Guardian Project. With this collaborative effort, policymakers aim to explore tokenization use cases in fixed income, asset management, and foreign exchange.
Deutsche Bank joined Project Guardian on May 14 in an effort to test the feasibility of asset tokenization applications in regulated markets.
Other notable names partnering with MAS include JPMorgan Chase & Co., DBS Group, Ant International, Standard Chartered Plc and T. Rowe Price Group. The goal is to develop industry standards for tokenization in areas such as cross-border forex settlement and bond trading.
While Deutsche Bank is optimistic about blockchain, the same cannot be said for its outlook on cryptocurrencies. A recent report of the bank questioned the stability and solvency of Tether, highlighting concerns about transparency and the risk of trigger events.
Tether rejected these claims, criticizing the report for lacking clarity and substantive evidence.