Deutsche Bank Develops Layer 2 for Ethereum – With Extras for Authorities

Deutsche Bank is working on its own network that will enable tokenization in the Ethereum (ETH) ecosystem. The Dama 2 project in Singapore gives authorities control options.

Deutsche Bank is involved in a project called Dama 2 in Singapore to develop a blockchain solution that meets the requirements of regulators and other government agencies

The business news agency Bloomberg reports that Dama 2 is designed as Layer 2 for Ethereum (ETH) and will integrate Zero Knowledge (ZK) . From the perspective of the crypto scene, however, it is another detail that is irritating about Deutsche Bank’s plans.

Dama 2 is not intended to copy any of the many Layer 2s for Ethereum, but to score points with features that are required by authorities. Some experts speak of a “super administrator” whose rights and options for intervention are predefined. Deutsche Bank itself emphasizes in a press release that its initiative is designed for “regulated financial markets.”

Cooperation partner Matter Labs says that Deutsche Bank’s Ethereum Layer 2 is designed to be “public and subject to approval.” In plain language: Regulatory authorities and possibly other government agencies should not only have a say in Dama 2, but should also be granted the right from the start to track transactions and, if in doubt, to stop them.

From the perspective of the financial industry, such an approach to the authorities is understandable. Dama 2 already had a predecessor and is part of the larger Guardian project of the financial regulator in Singapore. There, 24 international financial institutions, including Deutsche Bank, want to explore how to implement tokenization in compliance with the law.

In the medium term, banks and other market participants hope to represent shares, raw materials and other monetary goods as tokens in the future and thus make them tradable and transferable via the blockchain. Billions in sales are expected, but this also means new territory in terms of regulatory requirements.

Conclusion: Deutsche Bank Blockchain – balancing act between crypto and regulation

The Deutsche Bank Blockchain is also being mocked online, saying that the project is like “strict German parents allowing a party but installing cameras and breathalyzers beforehand”. Dama 2 breaks with the Bitcoin ideals of the early days, because a classic blockchain should not be influenced from the outside.

A prototype of Dama 2 is due to appear next year and then, if possible, get the “green light” from Singapore’s financial regulator to prove itself in everyday life. In this way, what Deutsche Bank is pushing forward in Asia could later be launched in the EU.

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(Featured image by Wolfgang Fritz via Unsplash)

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