Deutsche Bank Sees Huge Potential in Blockchain

Published on 11 December 2017 by Cryptovest Staff

Deutsche Bank has published a report on blockchain technology and the cryptocurrency market. The German banking giant is confident about blockchains but quite hesitant when it comes to cryptocurrencies.

Report Overview and Market Insights

A recent report published by Deutsche Bank sees enormous opportunities related to the blockchain technology, especially in the financial sector. On the other hand, the bank is not so enthusiastic about cryptocurrencies and the hype surrounding them, noting that the market is “highly speculative” at present.

Blockchain got more recognition last week, when the Australian Securities Exchange (ASX) announced that it would fully replace its Clearing House Electronic Subregister System (CHESS) with distributed ledger technology (DLT). The fact that CHESS is in good enough shape to continue functioning at a decent level strengthens further the case for blockchain application. Deutsche Bank considers this emerging technology “one of the most innovative developments in recent years.”

Impact on Financial Business Models

The report notes that DLT has the potential to transform the business models of financial companies, especially in the field of equity markets.

Blockchain Advantages and Challenges

According to Deutsche Bank, the advantages of blockchain are:

  • Decentralization: Distributed control enhances system resilience.
  • Security through encryption: Robust encryption techniques secure transactions.
  • Transparency: Open ledgers improve trust and traceability.
  • Versatile application: Adaptable across various sectors.

The report also lists several weaknesses:

  • Limited memory capacity: Constraints on data storage.
  • Access permissions: Challenges in managing user rights.
  • Scalability: Difficulties in handling growing transaction volumes.
  • Need for trust in new technologies: Adoption hurdles due to uncertainty.

Even if scalability is considered a weak point, the report notes that IOTA has managed to resolve this issue.

Future Projections and Market Statistics

The paper goes on to say that 63% of German banking managers anticipate a transformation in their business model as a result of blockchains. A third of the respondents predict financial advantages due to blockchain adoption. The statistics are based on a recent PwC research.

Deutsche Bank has made an attempt to predict when blockchain would get fully adopted by banks, concluding that we could see this happening between 2020 and 2022. Moreover, the report says that 10% of the global GDP might be regulated via blockchain by 2027.

Outlook on Cryptocurrencies

The leading German bank is not so positive about cryptocurrencies, noting the unregulated environment. Bitcoin and other cryptocurrencies could become a new asset class when more regulation is applied. However, Chicago-based CME Group already considers Bitcoin an asset class and is poised to launch Bitcoin futures.