Inside Deutsche Bank’s Pilot to Use Blockchains to Manage Tokenized Assets

Digital technology is undoubtedly the spear tip of innovation driving financial services forward.

And that spear tip is coming to include blockchain, or distributed ledger, technology. That’s because proponents of blockchain and on-chain solutions believe the tokenization of financial assets could one day reshape the operating models and transform the business functions around areas like wealth management.

After all, blockchain technology has been steadily gaining momentum across the globe, particularly within the Asia Pacific region.

The importance of that exploration is why Deutsche Bank is participating in Project Guardian, an ambitious multiyear initiative headed by the Monetary Authority of Singapore (MAS).

The project seeks to explore and test the feasibility of asset tokenization applications within regulated financial markets, setting the stage for a new era of digital finance, Boon-Hiong Chan, lead for Project Guardian and head of securities and technology advocacy and industry applied innovation at Deutsche Bank, told PYMNTS.

“The value is in understanding how, as a result of tokenization, your workflows change, your role and responsibilities change, your operating model and business change, and how you realize new revenue as well as what the new costs and risks to watch for,” Chan said.

Applications and Prospects for Blockchain

Chan’s vision for the future of digital finance in Asia Pacific is one of continuous innovation and collaboration. By participating in initiatives like Project Guardian, Deutsche Bank aims to remain at the forefront of technological advancements, contributing to the development of a secure, transparent, interoperable and efficient financial ecosystem.

The project is divided into various workstreams, each focusing on different aspects of asset tokenization and digital finance. One workstream is dedicated to asset and wealth management, which seeks to develop an open architecture blockchain platform. This platform aims to service tokenized and digital funds, ensuring they can be managed and traded efficiently within a regulated framework.

“Just like email evolved to allow seamless communication across different email platforms, standardizing blockchain protocols can facilitate better understanding, reduce risks and enhance cooperation across the financial industry,” Chan said.

The potential applications of blockchain technology within Project Guardian are vast. From enhancing the efficiency of asset management to providing greater transparency and security in financial transactions, the initiative aims to address several critical challenges facing the industry today. Chan elaborated on how the project could revolutionize asset and wealth management by enabling seamless, secure and efficient tokenization of assets.

Blockchain’s Potential in Asia Pacific

As a key player in the asset and wealth management workstream, Deutsche Bank will leverage its expertise and resources to test and develop a blockchain asset servicing platform that meets the project’s objectives.

Chan said the collaboration with MAS, alongside technology partners such as Memento Blockchain and Interop Labs, underscores Deutsche Bank’s commitment to pioneering innovative solutions in the financial sector.

According to Chan, the initiative’s primary focus is on creating a seamless and interoperable blockchain ecosystem that can support servicing of tokenized assets and funds. This involves developing protocols and standards that ensure security, transparency and efficiency in digital asset management.

“Project Guardian is very, very important to the growth and development of the industry,” Chan said. “It offers a valid opportunity for regulators and industry participants to co-create within a regulated framework, ensuring that innovative solutions align with current and future regulatory landscapes.”

Deutsche Bank’s previous collaboration with Memento Blockchain on the proof-of-concept DAMA 1 in 2023 serves as a foundation for the current efforts under Project Guardian, and Chan highlighted the importance of collaboration in achieving next-generation on-chain objectives.

By working closely with MAS and other stakeholders, Deutsche Bank aims to leverage collective expertise and resources to drive innovation and progress.

“These digital-native firms are experts in blockchain and interpretability and interoperability,” Chan said, noting that Deutsche Bank can bring years of financial and regulatory expertise to the table.

Initiated by MAS, Project Guardian is a collaborative endeavor that includes participants such as the United Kingdom’s Financial Conduct Authority (FCA), Switzerland’s Financial Market Supervisory Authority (FINMA) and Japan’s Financial Services Agency (FSA). These entities, along with industry stakeholders, are working in concert to explore the potential of blockchain technology in regulated markets.

“The nexus of financial services digitalization, technology and regulations will be the strategic leverage for our clients, bringing them closer to their goals in a practical and informed manner,” Chain said. “We are committed to exploring and implementing solutions that not only meet current market needs but also anticipate future trends and challenges.”