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German banking giant Deutsche Bank AG sees blockchain technology as a means to mitigate margin compression.
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 record-keeping 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, the bank's head of securities services and global head of sales for Asia-Pacific and Middle East, by using blockchain and smart contract-based solutions, the German banking giant can reduce costs, transaction times and risk. general.
“It will help us remain relevant, because with the kind of margin compression that affects the financial services industry in general, the only way to survive is to innovate,” Anand saying.
Margin compression refers to the reduction in profit margins in financial services due to rising costs, regulatory pressures and increased competition.
For now, the project remains a proof of concept, but the bank plans to commercialize it in the future.
“The investment we will make in the next two-three years and what we did in the last two-three years should pave the way for a good business future,” Anand added.
The platform is part of the Monetary Authority of Singapore (MAS) Guardian Project. With this collaborative effort, policymakers aim to explore use cases for tokenization in fixed income, asset management and currencies.
Deutsche Bank incorporated Project Guardian on May 14 in a bid to test the viability of asset tokenization applications in regulated markets.
Other big names collaborating 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 currency settlement and bond trading.
While Deutsche Bank is bullish on blockchain, the same cannot be said for its outlook on cryptocurrencies. A recent report from the bank questioned Tether's stability and solvency, highlighting concerns about transparency and the risk of decoupling events.
Tether dismissed these claims and criticized the report for lacking clarity and substantial evidence.
