“This year can certainly be called ‘the year of financial asset tokenization.’ The trend of moving traditional financial assets to blockchain and turning them into virtual asset tokens has spread like a fad. However, the question of ‘how to manage the assets that have been moved to the blockchain’ is still a homework that needs 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, said this during a meeting with Chosun Biz at the Shilla Hotel in Jangchung-dong, Seoul, on the 14th of last month.
Deutsche Bank, a major commercial bank in Germany established in 1870, is approaching an asset size of $1.5 trillion (approximately 2,148 trillion won) and ranks 34th in global bank asset rankings. Axela is a blockchain connection platform developer founded by Vlachos in 2020. It operates a platform connecting 69 different blockchains, including Ethereum and Avalanche.
The 200-year-old major bank and the up-and-coming blockchain developer appear to be worlds apart, yet they joined hands in Singapore. By participating together in the Monetary Authority of Singapore's (MAS) national blockchain project, Damah2, the two companies pledged collaboration. Damah2 is a project by the Singapore government that develops tokenization services to transform traditional financial assets into virtual assets using blockchain technology. It is also researching ways to manage financial assets within the blockchain while significantly reducing the asset management expenditure that was previously high.
Chan noted, “Large asset management firms such as BlackRock and Franklin Templeton are already managing tokenized assets on the blockchain,” and added, “Deutsche Bank also participated in Damah2, contemplating the provision of new services in the future financial landscape.”
When asked why traditional banks are venturing into blockchain business, Chan replied, “The essence of fiduciary duty in the financial industry remains unchanged.” He explained, however, that banks can no longer monopolize fiduciary institutions, hence they must also keep up with technological advancements. Chan stated, “It’s now an era where customers choose whether to entrust their assets to banks or fintech companies,” and he noted, “Deutsche Bank has begun new attempts to identify the elements necessary for asset tokenization services and to develop relevant technologies.”
Axela, identified as a partner of Deutsche Bank, plays a role in connecting Deutsche Bank's private blockchain and external public blockchains in Damah2. A private blockchain refers to a blockchain accessible only to specific individuals, akin to a financial institution's internal network. A public blockchain refers to blockchains such as Bitcoin and Ethereum that can be accessed by anyone. Axela's role is to create a bridge connecting Deutsche Bank's private blockchain with external blockchains to facilitate the movement of tokenized assets and information.
Vlachos stated, “There is no task more critical than asset exchange in traditional finance. The same goes for finance on the blockchain,” and said, “We are contemplating connection methods for exchanging assets between Deutsche Bank's blockchain and the public blockchain.” He added, “Axela prioritizes security. Over three years of operating the platform, we have recorded transaction volumes exceeding $10 billion (approximately 14 trillion won) without a single security incident.”
Regarding concerns that trust may decrease when financial assets are converted into virtual assets, Chan remarked, “Deutsche Bank was the first global bank to introduce electronic money in 1996.” He went on to explain that there were similar concerns about the trustworthiness of electronic money that sends cash over the internet at that time, but the focus was on solving issues to enhance trust. Chan emphasized, “The attempt to transform financial assets into virtual assets is a case where technology transforms the industry,” adding, “There is potential to enhance the efficiency of finance.”
Rather, Vlachos described the tokenization of financial assets, including Damah2, as “disruptive innovation.” He stated, “I am convinced that tokenization will become the way that all assets are managed in the future,” and noted, “In the existing financial sector, there are issues such as complicated and slow procedures and settlement delays that can be resolved with blockchain and tokenization. I anticipate that such transformation will occur within the next decade.”
Deutsche Bank and Axela have announced plans for collaboration even after the conclusion of the Damah2 project. Chan stated, “If we achieve the primary objectives of Deutsche Bank and Axela while proceeding with Damah2, we will then set commercial goals.” Vlachos also mentioned, “We started collaborating with Deutsche Bank nine months ago,” stating that “Having worked together, I believe Deutsche Bank has sufficient capabilities to position itself as an institution leading trends in the blockchain industry. I hope that the collaboration project with Deutsche Bank will develop into a business that generates actual revenue.”
Boon-Hiong Chan is the head of Deutsche Bank's Asia-Pacific Applied Innovation Division.
▲Master's degree in cybersecurity policy engineering from George Washington University, ▲Chief Market Officer of Deutsche Bank's Asia-Pacific region, ▲Head of Deutsche Bank's Global Securities and Technology Division.
Georgios Vlachos is a co-founder of Axela.
▲Master's degree in computer science from the Massachusetts Institute of Technology, ▲Chair of the Mathematics Department at Algorand.