Deutsche Bank evaluates issuing stablecoins and tokenized deposits

Deutsche Bank AG is actively exploring stablecoins and various forms of tokenized deposits as major financial institutions gain confidence in expanding their presence within the digital asset space.

Sabih Behzad, Deutsche Bank’s head of digital assets and currencies transformation, explained in an interview that the bank is considering different strategies, including issuing its own token or collaborating on an industry-wide initiative.

He added that the bank is also assessing whether to develop its own tokenized deposit solution for payment use.

EU-wide standards already exist, US Congress is passing stablecoin legislation, and global banks are examining how these tokens and blockchain technology can improve productivity. Even though some of these projects have had years to gain traction, not many have quite broken through to real-world, mainstream scale.

Behzad said they can certainly see the momentum of stablecoins along with a regulatory supportive environment, especially in the US.  He noted that banks have a wide variety of options available to engage in the stablecoin industry — everything from acting as a reserve manager to issuing their own stablecoin, either alone or in a consortium.

Stablecoins—digital tokens pegged to currencies like the dollar or euro—and tokenized deposits both represent money on a blockchain, designed to make payments faster and more cost-effective.

Tokenized deposits are usually digital tokens issued by regulated banks, representing claims on bank deposits, essentially reflecting bank account balances on a blockchain.

European banks and major players drive stablecoin innovation and adoption

According to Bloomberg News, Banco Santander SA is reportedly in the early stages of its plans to launch a stablecoin and offer cryptocurrency access to retail clients via its digital bank.

Deutsche Bank’s asset management arm, DWS Group, has teamed up with Dutch market maker Flow Traders Ltd. and crypto fund manager Galaxy Digital Holdings Ltd. to create a euro-denominated token.

“I see a role for a European stablecoin or collaboration among European banks to develop one, particularly for settlement in a digital economy,” said ING Groep NV CEO Steven van Rijswijk in a recent interview. However, he noted that the Amsterdam-based lender currently has no public plans to announce.

Early client adoption is emerging in payments. JPMorgan Chase & Co. reports that its Kinexys network processes over $2 billion in daily transactions on average, following a tenfold increase in volumes last year. However, this still represents a small fraction of JPMorgan’s overall daily payment processing of roughly $10 trillion.

Last year, Deutsche Bank invested strategically in Partior, a blockchain-based cross-border payments and settlement company. The Frankfurt-based bank is also involved in Project Agorá, an initiative led by the Bank of International Settlements and various central banks to explore how tokenization can improve wholesale cross-border payments. In 2023, Deutsche Bank partnered with Swiss blockchain firm Taurus to develop digital-asset custody services for institutional clients.

Big tech accelerates digital token adoption

Growing momentum for United States stablecoin regulation is reportedly pushing major tech firms to explore digital token integration. The “Guiding and Establishing National Innovation for US Stablecoins Act,” or the GENIUS Act, is a key development encouraging companies to dive deeper into digital assets.

The bill seeks to provide a regulatory framework for stablecoins and their issuers in the country but has been met with debate about Big Tech’s potential participation in the crypto industry.

According to The New York Times, Republican Senator Josh Hawley recently said he would vote against the bill in its current form as it would allow tech companies to issue digital currencies that would compete with the dollar.

In response, Democrats are reportedly planning to introduce an amendment that would prohibit Big Tech companies from creating their own stablecoins, according to an informed source cited by the NYT.

This change would require tech firms operating in the US to rely on existing stablecoin issuers like Tether and Circle.

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