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Deutsche Bank is reportedly building a second layer under an asset servicing pilot project called Dama 2 as part of the lender’s goal to remove regulatory hurdles for institutions that want to use public blockchain.
According to Bloomberg a report It was published on December 18 that German banking giant Deutsche Bank AG is building a “so-called” Layer 2 For a public network. The lender hopes the project will remove regulatory challenges faced by financial companies trying to integrate the public sector Block chains in their operations.
Last month, Deutsche Bank released a beta version of Project Dama 2, which includes the second layer built on Ethereum (Ethereum(The network, the second largest cryptocurrency network by market capitalization after Bitcoin)Bitcoin).
Public blockchains like Ethereum pose a risk to financial institutions entering the blockchain, as companies have concerns about interacting with criminals or sanctioned entities within the ecosystem, said Boon Hyung Chan, head of applied innovation for Asia Pacific industry at Deutsche Bank.
This is because, according to Chan, institutions do not know “who exactly is validating transactions” and whether transaction fees could fall into the pockets of sanctioned entities. There is also the looming threat of facing a “hard fork” in the ecosystem that could radically change the digital ledger.
“By using two chains, a number of these regulatory concerns should be met,” Chan told Bloomberg, adding that the bank is still awaiting regulatory approval but hopes to launch the product as a minimum viable level by next year.
Chan believes the built-in second layer could pave the way for banks to explore new opportunities within public blockchains, allowing them to organize a “more detailed list of validators” who will process digital asset transactions to earn rewards.
Additionally, he stated that regulators could be granted “superior administrative rights” that would allow them to monitor the movement of funds within the blockchain to detect illicit transactions.
“You don’t rely on the first layer to get detailed transaction records anymore,” Chan said.
Project Dama 2 is part of a larger initiative formed by the Monetary Authority of Singapore called Project Guardian. Project Guardian brings together 24 leading financial companies exploring ways to use blockchain to tokenize assets. Despite this, the project has raised questions about how far deep banks are willing to venture when it comes to the cryptocurrency space.
Dama 2 in particular was born out of collaboration with cryptocurrency companies Memento Blockchain and Interop Labs. The platform was built using ZKsync technology.
As early as May 2024, Deutsche Bank Announce It was in the process of testing an unnamed platform based on Ethereum. The bank said that the platform will provide services centered around tokenized funds.
Deutsche Bank joined the Guardian project on May 14, aiming to test the feasibility of asset tokenization alongside other major banking firms such as JPMorgan Chase & Co. DBS Group, Ant International and others.
