“This year can undoubtedly be called the year of financial asset tokenization. The trend of transferring traditional financial assets to blockchain to create virtual asset tokens has spread like a fad. However, the question of ‘how to manage assets that have been transferred to the blockchain’ remains a task to be solved.”
Boon-Hiong Chan, 54, head of Deutsche Bank's Asia-Pacific Applied Innovation Division, and Georgios Vlachos, 31, co-founder of Axela, met with Chosun Biz at the Shilla Hotel in Jangchung-dong, Seoul, on the 14th of last month and said this.
Deutsche Bank, established in 1870, is the largest bank in Germany. Its assets approach $1.5 trillion (about 2,148 trillion won), ranking 34th globally among banks by asset size. Axela, a blockchain connectivity platform developer, was founded by Vlachos in 2020. The platform connects 69 different blockchains, including Ethereum and Avalanche.
The large bank with a history of 200 years and the fledgling blockchain developer have joined forces in Singapore. Participating together in the Monetary Authority of Singapore (MAS) national blockchain project, Dama2, the two companies have promised collaboration. Dama2 is a project by the Singapore government to develop tokenization services that convert traditional financial assets into virtual assets using blockchain technology. The project is also researching ways to manage financial assets within the blockchain while significantly reducing the asset management fees that were previously incurred.
Chan said, “Large asset management firms such as BlackRock and Franklin Templeton are already managing tokenized assets on the blockchain,” and noted, “Deutsche Bank, too, has joined Dama2 while contemplating new service offerings in the future financial environment.”
When asked about why traditional banks are venturing into blockchain, Chan replied, “The essence of trust in the financial industry does not change.” However, he explained that since banks can no longer monopolize the role of custodians, they must also follow technological advancements. Chan noted, “We are now in an era where customers choose whether to entrust their assets to banks or fintech companies,” and said, “Deutsche Bank has embarked on new attempts to identify the elements necessary for asset tokenization services and develop related technologies.”
Axela, identified as a partner of Deutsche Bank, will perform the role of connecting Deutsche Bank’s private blockchain with external public blockchains in Dama2. A private blockchain is a blockchain accessible only to certain individuals, akin to a financial institution's internal network. A public blockchain refers to a blockchain that anyone can access, such as Bitcoin and Ethereum. Axela's role is to create a bridge connecting Deutsche Bank’s private blockchain and external blockchains to transfer tokenized assets and information.
Vlachos stated, “There is no task as critical as asset exchange in traditional finance. The same goes for finance on the blockchain,” and added that he is considering connection methods for exchanging assets between Deutsche Bank's blockchain and those on public blockchains. He further assured, “Axela prioritizes security as its foremost value. Over three years operating the platform, we have recorded a transaction volume exceeding $10 billion (about 14 trillion won) without a single security incident.”
Regarding concerns that the credibility may decrease when financial assets are converted into virtual assets, Chan noted, “Deutsche Bank was the first global bank to introduce electronic currency in 1996,” and recalled, “At that time, there were criticisms that the reliability of electronic currency, which allows cash transfer over the internet, was low, but we focused on solving problems to increase reliability.” Chan added, “The attempt to transform financial assets into virtual asset forms is a case where technology is transforming the industry,” and stated, “It has the potential to enhance the efficiency of finance.”
Rather, Vlachos evaluated the tokenization of financial assets, including the Dama2 initiative, as a “disruptive innovation.” He stated, “I am confident that tokenization will become the method of managing all assets in the future,” and noted, “The existing financial sector has complex and slow procedures and settlement delays, but these can be resolved through blockchain and tokenization. I expect this transformation to occur within the next decade.”
Deutsche Bank and Axela have indicated plans for collaboration even after the Dama2 project concludes. Chan stated, “If we achieve the primary goal of Deutsche Bank and Axela during the Dama2 project, we will next set commercial goals.” Vlachos also remarked, “We began collaborating with Deutsche Bank nine months ago,” and expressed, “Having worked together, I find that Deutsche Bank has sufficient capacity to position itself as a leading institution in the blockchain industry. I hope that our collaborative project with Deutsche Bank develops into a business that generates actual revenue.”
Boon-Hiong Chan is the head of Deutsche Bank's Asia-Pacific Applied Innovation Division.
▲Master's in cybersecurity policy engineering from George Washington University, United States ▲Asia-Pacific Market Managing Director of Deutsche Bank ▲Global Head of Securities Markets and Technology at Deutsche Bank.
Georgios Vlachos is the co-founder of Axela.
▲Master's in computer engineering from the Massachusetts Institute of Technology, United States ▲Chair of Mathematics at Algorand.