Deutsche Bank, Europe’s largest lender, is exploring the potential of stablecoins and tokenized deposits. The bank is currently weighing options for issuing its own stablecoin or collaborating on an industry-wide initiative, according to Sabih Behzad, Deutsche Bank’s head of digital assets and currencies transformation, in an interview with Bloomberg.

The move comes as banks increasingly eye stablecoins – digital currencies pegged to fiat currencies like the Euro or Dollar – and tokenized deposits – blockchain-based representations of traditional bank deposits – as pathways to faster and more cost-effective payment methods. While these technologies have been under development for years, large-scale practical applications have remained somewhat limited.

“We can certainly see the momentum of stablecoins along with a regulatory supportive environment, especially in the US,” Behzad stated. “Banks have a wide variety of options available — everything from acting as a reserve manager to issuing their own stablecoin, either alone or in a consortium.”

Growing regulatory clarity, particularly with established EU-wide frameworks and pending stablecoin legislation in the US Congress, is bolstering banks’ confidence in entering this burgeoning sector.

Deutsche Bank is not alone in its digital asset pursuits. Spanish banking giant Banco Santander recently embarked on early-stage work for its own stablecoin and plans to integrate crypto services through its digital banking arm. Moreover, Deutsche Bank’s asset management division, DWS Group, has already launched a joint venture with Flow Traders and Galaxy Digital to issue a euro-denominated token.

Meanwhile, JPMorgan’s Kinexys network, which facilitates blockchain-based payments, now processes over $2 billion daily, although this remains a fraction of JPMorgan’s vast $10 trillion in daily payment flows.

Deutsche Bank’s foray into digital assets is part of a broader, gradual build-up of its capabilities. Last year, the bank invested in Partior, a blockchain-based cross-border payments platform. In 2023, it partnered with Swiss blockchain firm Taurus to provide digital asset custody services to institutional clients. The bank is also a participant in Project Agorá, a Bank for International Settlements-led initiative involving several central banks, focused on exploring the role of tokenization in wholesale cross-border payments.