Deutsche Bank Engages in Stablecoin Swap on Ethereum Blockchain


In a recent development, Deutsche Bank, in collaboration with Standard Chartered, conducted a noteworthy exchange of dollars for euros using stablecoins and blockchain technology. Interestingly, they have departed from the trend of simulating decentralization and have ventured into a more centralized approach.

This exchange, or swap, is essentially the exchange of currencies or tokens. With the advent of decentralized exchanges like Uniswap, these swaps have become so user-friendly that even a ten-year-old could execute them in just a minute and a half, with a mere two and a half clicks, and no prior knowledge required.

Every day, millions of users swap coins and tokens worth hundreds of millions, if not billions of dollars, via decentralized exchanges or directly in their wallets. This is usually a quiet affair with no press releases to herald it.

However, the narrative shifts when banks engage in swaps. While they are essentially doing the same thing, it takes weeks, occurs within their own infrastructure even when utilizing the Ethereum blockchain, and warrants widely circulated press releases.

The Dollar-Euro Stablecoin Swap

Recently, SC Ventures, the innovation division of Standard Chartered, and Deutsche Bank executed a stablecoin swap using USDC and EURS. Both of these stablecoins run on the Ethereum blockchain, but the two banks utilized the “Universal Digital Payment Network (UDPN)” as their platform.

To prepare for the swap, SC Ventures established a “decentralized” identity via a “software development kit” (SDK) and an application interface (API) on the UPDN, linking it to a wallet. It then executed “multiple transfers and swaps” between USDC and EURS into Deutsche Bank wallets.

Concurrently, Deutsche Bank carried out similar transfers and swaps aimed at the SC Ventures wallet. These transactions occurred in real-time and are visible through Ethereum block explorers.

The press release underlines that Deutsche Bank employed a “graphical interface” within its special UDPN environment. Both financial institutions connected their UDPN nodes to the UDPN consensus network, and these tests took place over several weeks.

Exploring the “Universal Digital Payment Network”

This experiment serves as the initial entry in a series of 12 proof-of-concept trials, where the banks seek to evaluate how well the UDPN can integrate into their operations. But what exactly is the UDPN, and why is it even necessary?

The UDPN was introduced in January at the World Economic Forum in Davos, Switzerland. It is described as a “DLT-powered messaging backbone” designed to ensure interoperability among various stablecoins and central bank digital currencies (CBDCs), connecting different blockchains, both public and private, and integrating them with commercial IT systems.

While it is decentralized, it doesn’t appear to be entirely permission-free. To test the system, registration is required, and access to the white paper is granted only after completing a contact form.

The UDPN website frequently references CBDCs and regulatory requirements, indicating that it may not be as open as true cryptocurrencies, but rather serves to funnel activity back into traditional channels governed by institutional entities.

On their website, the UDPN outlines 12 applications, which presumably correspond to the 12 proof-of-concepts undertaken by Deutsche Bank and SC Ventures. These applications encompass implementing the travel rule, cross-institutional KYC, bank-issued stablecoins, purchasing digital currencies with fiat money, and the tokenization of digital assets, among others.

The Centralization Dilemma

The UDPN represents an intriguing juncture, symbolizing the shift in the approach of traditional financial institutions and their attempts to replicate the decentralized ethos. Initially, they dismissed Bitcoin and cryptocurrencies, believing their in-house systems were sufficient. Subsequently, they embarked on developing their private blockchains, such as R3, Corda, and Hyperledger. Later, they turned to Ethereum but as a private fork, Ethereum Enterprise.

All these endeavors to dictate the rules appear to have faltered, as it became evident that money operates more efficiently in open ecosystems than in isolated silos. Consequently, Deutsche Bank and Standard Chartered now employ the same stablecoins as the rest of the ecosystem, adhering to the ecosystem’s rules.

While the UDPN may offer some benefits for banks, decentralized tools originating from the ecosystem, such as cross-chain aggregators, various identity tokens, and open protocols for the travel rule, may prove to be more effective due to their openness and interoperability. Yet, another critical function of UDPN seems to be its ability to allow banks to emulate centralization.


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