Tech
Deutsche Bank Plans to Leverage Blockchain Technology to Reduce Margin Pressure in Securities
German banking giant Deutsche Bank AG is planning to leverage blockchain technology to address margin squeeze issues in the financial services sector. As a result, the bank has already started testing a platform based on the Ethereum network.
The platform provides digital services for tokenized funds through Project Guardian, an initiative of the Monetary Authority of Singapore. This project aims to explore the potential liquidity and efficiency benefits offered by blockchain technology.
Deutsche Bank seeks to address margin pressure
As passive investment products gain more traction in the market, fund managers are seeing continued declines in fee income. According to a study by Boston Consulting Group, the average asset management fee fell to 22 basis points in 2023, compared to 25 basis points in 2015 and an additional 26 basis points in 2010.
Project Guardian represents a joint initiative between policymakers and financial institutions to study tokenization applications in the fixed income, asset management and foreign exchange sectors. Project Guardian, an initiative led by the Monetary Authority of Singapore, seeks to delve deeper into the potential liquidity and efficiency benefits offered by blockchain technology. Speaking on the matter, Anand Rengarajan, head of securities at Deutsche Bank in Asia Pacific, said:
“It will help us stay relevant, because with the kind of margin compression affecting the entire financial services industry, the only way to survive is to innovate.”
Leveraging blockchain and smart contract solutions can also help the banking giant reduce costs, risks and transaction times, he added.
Exploring Tokenized Fund Services
German bank plans to introduce recordkeeping services aimed at assisting issuers of tokenized funds with investor monitoring, custody arrangements and valuations. According to Rengarajan, this initiative underlines the bank’s commitment to leveraging blockchain technology for greater efficiency.
The platform’s design prioritizes interoperability, ensuring accessibility for fund managers regardless of the underlying blockchain technology. While currently in the proof-of-concept stage, Rengarajan also envisions commercialization as the project’s ultimate goal. He added:
“We expect that investments made over the next two to three years, combined with previous efforts, will pave the way for a promising commercial future.”
In a collaborative effort, Deutsche Bank partnered with Swiss crypto technology firm Taurus SA last year to begin developing a digital asset custody service. Last month he also called the banking giant Bitcoin an important asset class.