Deutsche Bank, known as the largest foreign exchange dealer in the world, has revelaled its exploration of blockchain, among the growing interest by financial institutions in the technology that powers the bitcoin.
In response to the European Securities and Markets Authority call for evidence on virtual currency and distributed ledger, which was launched on 22nd of April 2015, the bank published a letter revealing that it has been exploring blockchain for a variety of potential applications.
Daniel Trinder, the Managing Director of Global Head of Regulatory Policy at the Deutsche bank stated in the letter, “Whilst the technology associated with distributed ledgers is still in its infancy (albeit evolving very quickly) we believe that it presents a potential opportunity to realize a number of important benefits including: more stable and resilient systems, faster processing of transactions and lower costs for bank customers.”
The bank will formally announce its plans on how blockchain technology will accumulate the way transactions are processed. Once the plans are disclosed, Deutsche Bank will become the world’s largest by assets. As stated in the 2014 data by Relbanks, Deutsche Bank was the world’s 12th largest institution, with the equivalent of $2.07 trillion under its care.
In its letter, the bank has cited the following areas of potential blockchain application:
Fiat currency payment and settlement
Securities issuance and transfer – creation of unique identifiers, transaction tracking and asset segregation
Securities cleaning and settlement – through delivery of more efficient post trade processing
Securities clearing and settlement – through automation of dividend/ interest payments and corporate actions processing
Enforcing derivatives contract and improving derivatives clearing through smart contracts
Asset registries – without the need for a central administrative authority
Know your Customer and Anti- Money Laundering registries surveillance
Creating transparency – and facilitating differentiated customer and regulatory reporting
The bank further stated in the letter, “In addition to these specific applications, the introduction of distributed ledger technology has the potential to allow for more fundamental changes to pre and post trade work flows within banks with additional efficiency benefits flowing from that.”
As a part of a ˆ1 billion investment on digital initiatives over the next five years, the bank is in the process of developing three innovation labs in Berlin, London and Silicon Valley.
Many new technology firms are influenced by the fintech solutions which are implemented by Deutsche Bank, one such is AlphaPoint, a leading financial technology platform provider.
Joe Ventura who is the founder of AlphaPoint, has also built software for Deutsche Bank.
The bank concluded letter by stating, “However, outside of the virtual currency realm, it is important that in seeking to mitigate potential risks arising from new applications of the blockchain/ distributed ledger technology, there is a proportionate approach taken and that an appropriate balance is struck between managing emerging risks and providing predictability for investment and space for continued innovation.”