Deutsche Bank Plans to Leverage Blockchain Tech to Reduce Margin Compression

German banking giant Deutsche Bank AG plans to utilize blockchain technology to address margin compression issues in the financial services sector. The bank has initiated testing of a platform based on the Ethereum network.

This platform, which provides digital services for tokenized funds, is part of Project Guardian, an initiative by the Monetary Authority of Singapore. The project’s goal is to explore the potential liquidity and efficiency benefits of blockchain technology.

Deutsche Bank Tackles Margin Pressure
As passive investment products gain market traction, fund managers face continuous declines in fee revenue. A study by the Boston Consulting Group found that the average asset management fee fell to 22 basis points in 2023, down from 25 basis points in 2015 and 26 basis points in 2010.

Project Guardian, a collaborative effort between policymakers and financial institutions, aims to investigate tokenization applications in fixed income, asset management, and foreign exchange sectors. Anand Rengarajan, Deutsche Bank’s head of securities in Asia Pacific, stated:

“It will help us stay relevant because with the kind of margin compression impacting the overall financial services industry, the only way one can survive is by innovating.”

Using blockchain and smart contract solutions can help the bank reduce costs, risks, and transaction times, he added.

Exploring Tokenized Fund Services
Deutsche Bank plans to introduce record-keeping services to assist issuers of tokenized funds in monitoring investors, custody arrangements, and valuations. According to Rengarajan, this initiative highlights the bank’s dedication to leveraging blockchain for improved efficiency.

The platform is designed to prioritize interoperability, ensuring access for fund managers regardless of the underlying blockchain technology. Although currently in the proof-of-concept stage, Rengarajan envisions commercialization as the project’s ultimate goal. He added:

“We anticipate that the investments made over the next two to three years, alongside previous endeavors, will pave the way for a promising commercial future.”

Last year, Deutsche Bank partnered with Swiss crypto technology firm Taurus SA to develop a digital-asset custody service. Recently, the bank also recognized Bitcoin as an important asset class.


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