Deutsche Bank is building an Ethereum L2 using ZKsync to tackle compliance in regulated finance

Germany's largest lender is building an Ethereum L2 using ZKsync to tackle compliance in regulated finance. If successful, this could pave the way for more institutions to embrace decentralized networks.

Banking giant Deutsche Bank is reportedly creating a layer-2 (L2) blockchain solution on Ethereum using ZKsync technology, in an effort to address compliance challenges in using public blockchains within regulated financial systems, according to a report by Bloomberg on December 12.

The L2 solution is part of a broader initiative dubbed Project Dama 2, which aims to enhance transaction efficiency and incorporate regulatory safeguards. The project will integrate with Ethereum while maintaining alignment with financial compliance requirements.

Project Dama 2 and Monetary Authority of Singapore (MAS)

Project Dama 2 is linked to the MAS’s Project Guardian, which involves 24 financial institutions exploring blockchain-based asset tokenization. Deutsche Bank’s approach curates a network of trusted validators and grants regulators oversight capabilities to reduce risks, such as interactions with sanctioned entities.

The initiative reflects a broader effort by Deutsche Bank to leverage blockchain technology while addressing regulatory barriers. Success could encourage other financial institutions to explore blockchain applications in asset servicing or adopt similar strategies.

Germany's largest lender is building an Ethereum L2 using ZKsync to tackle compliance in regulated finance. If successful, this could pave the way for more institutions to embrace decentralized networks. 🌐💡https://t.co/EVNEBaH5lF

Deutsche Bank Targets 2025 Launch

A minimum viable product (MVP) for the platform is targeted for release in 2025, pending regulatory approval. The next steps will be critical in determining the project’s viability and potential launch timeline.

L2 blockchains, which operate atop primary layer-1 networks like Ethereum, enable faster and more cost-effective transactions. They also offer tools for regulatory compliance, including "super admin rights," allowing financial regulators to audit and monitor activities when needed.

.@DeutscheBank is developing a Layer-2 blockchain on Ethereum using @zksync, as part of Project Dama 2, aiming to address compliance challenges in regulated finance. A minimum viable product is planned for 2025, subject to approval. pic.twitter.com/rcnKVEr5Jv

In other Deutsche Bank news, on December 10, the bank partnered with Crypto.com to offer corporate banking services across Asia-Pacific markets. These services include fiat-to-crypto exchanges and cross-border trading solutions.

Deutsche Bank has also indicated plans for partnerships in the United Kingdom and other European regions, signaling a continued focus on integrating blockchain into its global operations.