Deutsche Bank is developing the Dama 2 project to create a layer on the Ethereum network.

Reports indicate that Deutsche Bank has launched an ambitious pilot project called "Dama 2," aimed at creating a Layer 2 built on the Ethereum network, as a strategic move to facilitate the integration of financial institutions into public blockchains.

According to a Bloomberg report dated December 18, the project seeks to overcome the regulatory challenges that banks and financial institutions face when using public blockchains, while ensuring compliance with strict regulatory standards.

In this context, Bon Hyung Chan, Head of Applied Innovation for the Asia-Pacific region at Deutsche Bank, stated that blockchains like Ethereum pose significant risks, particularly when it comes to interactions with illegal or sanctioned entities. This includes concerns regarding the lack of clarity of the parties responsible for validating transactions and the potential for transaction fees to flow to prohibited entities.

Chan noted that Layer 2 could help address these concerns by allowing the bank to create a customized list of auditors who would handle transactions, thereby enhancing security and transparency. It could also grant regulatory authorities strong administrative powers to monitor financial flows within the blockchain, facilitating the identification of suspicious or illegal activities.

It is worth mentioning that Dama 2 was developed in collaboration with Memento Blockchain and Interop Labs using ZKsync technology. The project is part of a broader initiative known as "Project Guardian," which is led by the Monetary Authority of Singapore, and aims to explore the possibilities of asset tokenization in collaboration with major financial companies such as JPMorgan and DBS Group.