Author: Weilin, PANews

Traditional financial institutions have also begun to end their careers as Layer 2. Boon-Hiong Chan, Deutsche Bank’s head of industry application innovation in the Asia-Pacific region, recently revealed to the outside world that Deutsche Bank is launching a Layer 2 solution based on Ethereum. The project is called Project Dama 2, and its beta version has been launched in November. , is expected to be officially launched next year after regulatory approval.

This move not only marks the further exploration of traditional financial institutions in the field of blockchain, but may also start a new trend of safe and compliant zones. Blockchain solutions are being introduced into the core of traditional finance, and adoption rates are further increasing.

Built based on ZKsync Stack, multiple use cases are being tested

Deutsche Bank's Project Dama 2 is also the Monetary Authority of Singapore (MAS) "Guardian Plan" Project Guardian part of. This is a collaborative initiative between framers and the financial industry that aims to increase the liquidity and efficiency of financial markets through the tokenization of assets.

Project Guardian has 27 industry organizations participating, including Ant Group, ANZ Bank, Bank of New York Mellon, Citibank, DBS Bank of Singapore, Fidelity , Franklin Templeton, HSBC, JPMorgan Chase, Moody's, UBS, Standard Chartered, S&P Global, and more. In addition, it also includes a series of associations and cooperative organizations, such as SWIFT, as well as central banks, the World Bank and other developing institutions.

Memento Blockchain and Interop Labs are Deutsche Bank's technology partners, helping Project Dama 2 develop its minimum viable product. Specifically, Memento Blockchain has developed a fully functional testnet of the public permissioned chain Memento ZKchain. The testnet is built on the ZKsync Stack, supported by Matter Labs, and enables cross-chain interoperability via the Axelar network, powered by Interop Labs.

The main functions of Memento ZKchain include:

·Digital identity based on Soulbound Token: a secure and immutable identity system for permission management and facilitation of KYC, AML, sanctions checks and investments suitability test.

·Paymaster function: aims to simplify gas fee management through traditional payment channels and provide a clear audit trail for gas fee payment.

·Customized blockchain browser: designed to manage on-chain transaction confidentiality while retaining full regulatory review capabilities.

·Creation and distribution of tokenized funds: realized through Domani Protocol decentralized application (dApp), supporting the creation and distribution of tokenized traditional investment funds , hybrid funds that combine digital and traditional assets, or completely native digital funds.

In addition, Interop Labs has achieved comprehensive cross-chain connectivity between the Memento ZKchain test network and Avalanche Fuji and Stellar through the Axelar network. This feature supports integration with more than 69 blockchain networks, improving the accessibility, secure scalability and customization of financial applications.

Currently, the project team of Project Dama 2 is testing multiple use cases, including the issuance and distribution of tokenized funds, digital Interoperability of assets and digital cash circulation, and near real-time settlement for improved asset security and operational efficiency.

Exploring compliance challenges for financial institutions using public blockchains

Coming soon from Deutsche Bank Layer 2 is designed to address the compliance challenges faced by financial institutions when using public blockchains, such as unknown transaction verifiers, fees flowing to sanctioned entities, and hard fork risks.

The project leader believes that public chains such as Ethereum are full of risks for regulated lending institutions. These include the inability to determine "who is actually validating these transactions," whether transaction fees may be paid to sanctioned entities, and the threat of significant changes to the ledger due to unforeseen hard forks.

And LaYer 2 components may enable banks to freely experiment with public blockchains. This will enable banks to customize a “more personalized list of validators” who process digital asset transactions to earn rewards. Other benefits include the possibility of giving regulators – and regulators only – “super admin rights”, meaning they can scrutinize fund flows if necessary. “By using a dual-chain architecture, many of these regulatory concerns should be able to be addressed,” he said.

Advocates including Deutsche Bank see blockchain as an opportunity to combat margin compression in the financial services industry. However, some questions remain about how deeply banks should be involved in the crypto ecosystem.

Crypto industry insider AdrianoFeria.eth believes that crucially, the level of regulatory compliance required by these agencies is impossible on any Layer 1 blockchain. accomplish. For institutions that require strict oversight and interoperability, the only pragmatic options are to run their own private, permissioned Layer 1 chain, or to leverage Ethereum’s L2 ecosystem.

Deutsche Bank is continuing to make plans in the encryption field

Deutsche Bank will make frequent moves in the encryption field in 2024. Back in June, Deutsche Bank provided BitPanda with an API-based account solution, giving it access to the German International Bank Account Number (IBAN), an internationally recognized code that helps banks securely process international transfers. BitPanda plans to use this service to improve the efficiency and security of fund transfers.

In addition, Deutsche Bank also provides crypto market maker Keyrock with multi-currency accounts and foreign exchange services to help it optimize and expand in EMEA, APAC and LATAM Regional market making and over-the-counter (OTC) services. On November 27, Deutsche Bank joined Partior, a Singapore-based blockchain financial technology company, in its Series B financing as a strategic investor, supporting Partior in expanding its cross-border settlement capabilities and developing functions such as instant foreign exchange swaps and multi-bank payments.

On December 10, Deutsche Bank also announced a cooperation with Crypto.com to provide corporate banking services in Singapore, Australia and Hong Kong. Both parties plan to further expand the scope of cooperation in the future.

At present, although some traditional banks are initially cautious about blockchain technology, worried about its instability and regulatory uncertainty, the cryptocurrency ecosystem The trend towards greater maturity of systems now provides banks with importantAn opportunity to reimagine traditional financial services.

For example, in November this year, UBS announced the creation and piloting of a blockchain-based payment solution - UBS Digital Cash Cash), the same month, J.P. Morgan announced a major upgrade to its blockchain platform, which was renamed Kinexys from Onyx. According to JPMorgan Chase, JPMorgan’s blockchain business has executed more than $1.5 trillion in transactions since its inception in 2020, including intraday repurchases and cross-border payments, with an average daily processing volume of more than $2 billion. Its users include global enterprises such as Siemens, BlackRock and Ant International.

In general, as encryption industry insider Adriano Feria.eth pointed out, Deutsche Bank's entry into Ethereum L2 may not be a separate experiment, but It is part of a wider trend that may bring more secure, compliant blockchain solutions into the heart of traditional finance in the future. Other members of Singapore’s Project Guardian may also follow this initiative and push more traditional financial institutions to embrace Web3 technology and blockchain solutions.