German banking giant Deutsche Bank AG is looking at blockchain technology as a way to alleviate margin pressure.
A new report indicates that Deutsche Bank is testing an unnamed Ethereum-based platform. According to the bank, the platform offers services centered around tokenized funds.
Tokenization is the process of creating blockchain-based representations of real-world assets. Citigroup estimates that the tokenization market could reach $5 trillion by 2030, covering bonds, real estate and private equity.
The bank will leverage this platform to provide record-keeping services to help token fund issuers 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 for Asia Pacific and the Middle East and head of global sales, by using blockchain and smart contract-based solutions, the German banking giant can reduce costs, transaction times and overall risks.
“It will help us stay relevant, because with this kind of margin pressure affecting the financial services industry in general, the only way one can survive is to innovate.” He said.
Margin compression refers to declining financial services profit margins due to increasing costs, regulatory pressures, and increased competition.
Currently, the project is still 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 have done in the last two-three years should pave the way for a good business future,” Anand added.
The platform is part of the Guardian project of the Monetary Authority of Singapore (MAS). Through this collaborative effort, policymakers aim to explore tokenization use cases across fixed income, asset management and forex.
Deutsche Bank joined Project Guardian on May 14 in an effort to test the feasibility of asset tokenization applications in regulated markets.
Other major names collaborating with MAS include JPMorgan Chase & Co., DBS Group, Ant International, Standard Chartered Plc, 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 bullish on blockchain, the same cannot be said about its outlook for cryptocurrencies. A recent report from the bank questioned the stability and solvency of Tether, highlighting concerns about transparency and the risk of decoupling events.
Tether rejected these allegations, criticizing the report for lacking clarity and substantive evidence.