German banking giant develops Ethereum L2 using ZKsync

Germany's largest bank, Deutsche Bank, is developing a Layer 2 ethereum network using ZKsync technology to improve transaction efficiency and meet regulatory standards in finance, according to a new report from Bloomberg.

The initiative, which is part of Project Dama 2 and linked to Singapore's Project Guardian, aims to resolve key issues for regulated lenders operating on public blockchains, such as unknown transaction validators, risks of payments to sanctioned entities, and unexpected hard forks.

The goal is to enable banks to securely use public blockchains for various financial services while addressing regulatory concerns, said Boon-Hiong Chan, Head of technology Defense and APAC Stock Markets at Deutsche Bank.

The L2 solution will allow banks to create a “more personalized list of validators” and give regulators “super administrator rights” to monitor fund movements, he noted.

The bank presented a test version of Project Dama 2, an asset servicing pilot, in November. The addition of an L2 solution to the Dama 2 Project is also expected to offer cost-effectiveness benefits.

“By using two chains, several of these regulatory concerns should be able to be satisfied,” Chan said.

“You no longer rely on Layer 1 for detailed transaction logs,” he added.

The Dama 2 Project, developed in collaboration with Memento Blockchain and Interop Labs using ZKsync technology, is part of the Monetary Authority of Singapore's Project Guardian. This broader initiative involves 24 major financial institutions testing blockchain technology for asset tokenization.

The bank plans to launch a minimum viable product next year, provided it receives regulatory approval.

Deutsche Bank has recently partnered with crypto exchange crypto.com to improve corporate banking services in the Asia-Pacific region. The collaboration, announced on December 10, will initially focus on providing banking capabilities in Singapore, Australia and Hong Kong, with plans for future expansion to Europe and the United Kingdom.

The collaboration is part of crypto.com's broader global expansion strategy, which includes the launch of new products such as a stablecoin and an ETF by 2025.