Major financial institutions unite to address liquidity fragmentation threat of blockchain incompatibility
Deutsche Bank, Citi, Mastercard, Northern Trust and trade finance platform Centrifuge have come together to emphasise the industry’s need for “interlinked network models that embrace multiple blockchains” through a new report published by Axelar Foundation and Metrika.
Major FIs examine blockchain interoperability in new report
The report attempts to address the growing threat of liquidity fragmentation born as a result of the increasing number of blockchain use cases across the financial industry, as well as the exact challenges posed by the rise of blockchain technology in parallel with traditional financial systems.
Its position largely takes into account the framework established by the Monetary Authority of Singapore’s Project Guardian in 2023, which sets out key requirements for how blockchain interoperability could be achieved with flexibility, security, privacy, transparency, scalability and transaction monitoring.
The collaborators are to discuss the paper’s findings in a panel event at Point Zero Forum in Zürich, Switzerland, next month.
“Multichain asset interoperability and servicing will likely become a necessity for asset servicers as their clients adopt different chains,” comments Anand Rengarajan, global head of sales and head of securities services APAC, corporate bank, Deutsche Bank.
“It will be essential that asset servicers know how to address and service interoperability with scale, while ensuring digital asset safety to enable sustainable growth that multiple chains can amplify.”
The German bank is currently engaged in a series of experiments with Project Guardian to service tokenised and digital funds with an “open architecture and interoperable blockchain platform”, as announced last month, with a specific focus on the initiative’s asset and wealth management workstream.
“Tokenised assets are by nature interoperable, bridging assets recorded on off-chain ledgers with on-chain representations,” adds Georgios Vlachos, director of Axelar Foundation and co-founder of Axelar protocol.
“The question isn’t, how do we facilitate one such connection – it’s how do we facilitate potentially thousands of connections across on-chain and off-chain ledgers, in a way that’s secure, scalable and open.”
