Deutsche Bank is reportedly creating a layer-2 (L2) blockchain solution on Ethereum using ZKsync technology. The initiative aims to address compliance challenges in using public blockchains within regulated financial systems, according to Bloomberg.

The L2 solution is part of Project Dama 2, designed to enhance transaction efficiency and incorporate regulatory safeguards. It will integrate with Ethereum while maintaining alignment with financial compliance requirements.

Project Dama 2 and Compliance

Project Dama 2 is linked to the Monetary Authority of Singapore’s Project Guardian, which involves 24 financial institutions exploring blockchain-based asset tokenization Tokenization Tokenization represents the process of substituting a sensitive data element with a non-sensitive equivalent, i.e. token, which bears no extrinsic or exploitable meaning or value. In essence, the rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset. For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one represen Tokenization represents the process of substituting a sensitive data element with a non-sensitive equivalent, i.e. token, which bears no extrinsic or exploitable meaning or value. In essence, the rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset. For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one represen Read this Term. Deutsche Bank’s approach curates a network of trusted validators and grants regulators oversight capabilities to reduce risks, such as interactions with sanctioned entities.

The initiative reflects a broader effort by Deutsche Bank to leverage blockchain technology while addressing regulatory barriers. Success could encourage other financial institutions to explore blockchain applications in asset servicing or adopt similar strategies.

🚀 Germany's largest lender is building an Ethereum L2 using ZKsync to tackle compliance in regulated finance.

If successful, this could pave the way for more institutions to embrace decentralized networks. 🌐💡https://t.co/EVNEBaH5lF

— SWFT Blockchain (@SwftCoin) December 18, 2024

Deutsche Bank Targets 2025 Launch

A minimum viable product for the platform is targeted for release in 2025, pending regulatory approval. The next steps will be critical in determining the project’s viability and potential launch timeline.

L2 blockchains, which operate atop primary layer-1 networks like Ethereum, enable faster and more cost-effective transactions. They also offer tools for regulatory compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term, including “super admin rights,” allowing financial regulators to audit and monitor activities when needed.

.@DeutscheBank is developing a Layer-2 blockchain on Ethereum using @zksync, as part of Project Dama 2,aiming to address compliance challenges in regulated finance.

A minimum viable product is planned for 2025, subject to approval. pic.twitter.com/rcnKVEr5Jv

— Satoshi Club (@esatoshiclub) December 18, 2024

Separately, on December 10, Deutsche Bank partnered with Crypto.com to offer corporate banking services across Asia-Pacific markets. These services include fiat-to-crypto exchanges and cross-border trading solutions.

Deutsche Bank has also indicated plans for partnerships in the United Kingdom and other European regions, signaling a continued focus on integrating blockchain into its global operations.