Why does Deutsche Bank assess the application prospects of stablecoins and tokenization of deposits?

This issue summarizes the evaluation and practice related to Deutsche Bank’s stablecoin and tokenization of deposits based on publicly available information for reference.

According to Bloomberg, Deutsche Bank is evaluating the future of stablecoins and tokenized deposits. **The bank is currently evaluating two specific directions: one is to issue its own stablecoin or join the industry joint stablecoin project, such as the launch of the euro stablecoin project AllUnity through its DWS Group, Galaxy Digital and Flow Traders. The second is to study the application scheme of tokenized deposits in payment scenarios, aiming to optimize the payment and settlement process. The report pointed out that Deutsche Bank has made a layout in the field of digital assets, including investing in Partior, a blockchain cross-border payment platform, and establishing a partnership with Taurus, a Swiss blockchain company, to carry out digital asset custody business for institutional customers.

I. Strategic Background

Deutsche Bank’s AllUnity project represents a strategic entry of traditional financial institutions into the stablecoin space. This fully collateralized euro stablecoin will operate under the supervision of the German Federal Financial Supervisory Authority (BaFin), with plans to launch a corporate entity in 2024 and an official rollout expected between 2025 and 2026. The project aims to bridge traditional finance and digital assets, particularly focusing on automated payment scenarios for Internet of Things devices, enabling secure and continuous capital flow between machines.

In the field of tokenized deposits, Deutsche Bank has not disclosed specific projects, but industry practices have revealed its potential direction. Tokenized deposits are essentially blockchainized expressions of bank deposits, such as JPMorgan Chase’s JPM Coin for instant settlement between customers. Such products typically run on permissioned blockchains and are backed by full bank deposits, in contrast to the open architecture of stablecoins. The Hong Kong Monetary Authority’s Ensemble project exemplifies this trend, with its wholesale central bank digital currency (wCBDC) sandbox looking at how tokenised deposits can optimize the settlement of real-world assets such as green bonds and electronic bills of lading.

2. Demand Differences

Alternative Attributes of Stablecoins and Financial Inclusion Needs. Stablecoins were created because they could replace the role of banks. When cryptocurrency exchanges don’t have access to banking services, stablecoins provide a solution for value transfer. **Deutsche Bank’s AllUnity is aimed at enterprise-level payment scenarios, especially the micropayment needs of IoT devices, which reflects the core advantages of stablecoins, that is, its holding is all the characteristics that make value transfer without the support of the bank account system, such as Nigeria and other countries to make cross-border remittances through USDT, the handling fee is reduced from 8-12% to less than 3% through traditional channels, and the account is received in seconds. In 2025, more than 32 million unique addresses around the world will use stablecoins to transact, and the proportion of users in emerging markets will increase significantly, highlighting the value of financial inclusion.

Efficiency-optimized attributes of tokenized deposits and institutional needs. Tokenized deposits are essentially an augmentation tool for the banking system, not a substitute. It serves existing banking customers and eliminates intermediate clearing through blockchain technology. When a tokenized deposit is transferred between customers, the bank’s back-office will automatically adjust the balance of the relevant fiat currency account to ensure that the accounts are in line with the facts. This mechanism is particularly suitable for large-value transactions by institutional users, and according to publicly available information, Brazilian companies use tokenized deposits for cross-border payments, and large transactions of more than $1 million have increased by 29% in 2023. The Hong Kong Monetary Authority (HKMA) has gone a step further by exploring how tokenised deposits can be combined with wCBDC to achieve real-time payment (DvP) of assets such as bonds and carbon credits, compressing the traditional T+2 settlement cycle to minutes.

3. Service Regulation

Open Ecology and Regulatory Challenges of Stablecoins. Deutsche Bank’s AllUnity plans to be issued on public permissionless blockchains (e.g., Ethereum, Layer 2 networks) and support DeFi application integration. This openness has exposed it to intense regulatory scrutiny. The European Markets in Crypto Assets Regulation (MiCA) requires stablecoin issuers to hold liquid assets of equivalent value and must be a trust or licensed electronic money institution. The GENIUS Act also specifies that reserve assets must be short-term Treasury bonds and repurchase agreements.

The core contradiction of regulation lies in the determination of the “monetary attributes” of stablecoins: although they meet the monetary functions of a medium of exchange, store of value, etc., they may be recognized as securities due to the lack of “unity” (for example, 1 US dollar stablecoin is not always equal to 1 US dollar). This uncertainty has a direct impact on the business model – for example, Tether’s $98.5 billion in Treasuries has made it a significant holder of Treasuries, but its operating costs would rise significantly if it were classified as securities.

The closed scenario of tokenized deposits continues with bank regulation. Tokenized deposits extend the regulatory framework of commercial banks, essentially representing the digitization of deposits. If Deutsche Bank were to launch such a product, it would continue to use the existing banking license and be subject to the Basel III liquidity coverage ratio (LCR) and deposit insurance system. The sandbox experiment by the Hong Kong Monetary Authority demonstrates a typical scenario: tokenized deposits are restricted to whitelist users on a permissioned chain, and banks need to ensure that each Token corresponds to an equivalent deposit. This closed nature, while limiting innovation, mitigates the risk of “securities classification.”

However, at present, technical failures in tokenization deposits may lead to a misalignment between the tokens and the deposit balances, and tokenized deposits have not yet been included in the scope of deposit insurance. With enhanced programmability (such as automated dividend distribution), its “monetary purity” may become blurred, prompting a regulatory reassessment.

4. Market Revenue

The competition in the stablecoin sector has become fierce. By 2025, USDT (146 billion USD) and USDC (56 billion USD) will still dominate the market, but their market share is being eroded by some new stablecoins. Deutsche Bank’s euro stablecoin faces dual challenges: first, the first-mover advantage of the dollar stablecoins (which hold 99% of the market share); second, the yield innovations of decentralized stablecoins—such as USDe providing annual returns of 5-8% through Delta hedging staked ETH derivatives. Traditional institutions need to explore differentiated yield strategies: AllUnity may combine DWS’s asset management capabilities to invest part of its reserves in money market funds, but must operate within regulatory permissions.

The returns on tokenization deposits focus on efficiency improvements rather than direct investment returns. JPMorgan has reduced cross-border settlement times from days to minutes through JPM Coin, lowering liquidity costs. The green bond tokenization pilot in Hong Kong has demonstrated that related process automation can reduce settlement failure rates by about 30%. If Deutsche Bank advances such businesses, the returns will mainly come from transaction fees paid by institutional clients and the interest rate spread from funds held, but it needs to balance the costs of technological investment. Currently, the scale in this field is limited, with the total amount of tokenized bonds at approximately $12.8 billion, far below the stablecoin market.

Five, Interactive Integration

**Regulatory standardization and technology convergence. **2025 will be a regulatory watershed: the passage of the GENIUS Act will set a 1:1 floor requirement for stablecoins to reserve short-term U.S. Treasuries; The implementation of MiCA in the Eurozone has boosted the share of non-USD stablecoins. Deutsche Bank’s AllUnity needs to adapt to this trend, and its euro stablecoin may adopt a hybrid architecture – issued on a public chain but managed through a compliance layer such as Fireblocks. Tokenized deposit standards will also be harmonized: The Bank for International Settlements (BIS) is leading the development of an interoperability protocol between wCBDC and tokenized deposits, and the experience of the Hong Kong Ensemble project could become a global template.

**Functional complementarity and ecological synergy. The boundary between stablecoins and tokenized deposits will gradually blur, first, stablecoins will penetrate from retail holdings to institutional holdings, such as BlackRock’s BUIDL fund ($2 billion scale) embedding U.S. bond income into tokens to provide institutions with on-chain cash management tools, Deutsche Bank can learn from this model to upgrade AllUnity to an “interest-bearing stablecoin”; The second is the gradual opening up of tokenized deposits, such as allowing non-customers to hold tokens under certain conditions in the future, and may achieve compliant cross-chain transfer through zero-knowledge proofs; The third is the gradual integration of infrastructure, such as the future of banks are expected to build a unified entrance - corporate customers complete large-amount settlements through tokenized deposits, and supply chain SMEs receive payments through stablecoins, and the two are automatically exchanged on the chain.

Stablecoins serve as the veins of open finance, continuously penetrating emerging markets and long-tail users; tokenization of deposits has become the efficiency engine for institutions, reshaping the settlement logic of capital markets. The two gradually integrate in the central bank’s regulatory sandbox and cross-chain protocols, ultimately giving rise to a layered and interconnected currency ecosystem.