JPMorgan Explores Blockchain-Based Deposit Tokens

Updated: 08 September 2023

Disclosure

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Join Our Telegram channel to stay up to date on breaking news coverage

JPMorgan is exploring a blockchain-based digital deposit token for expediting cross-border payments and settlement, Bloomberg reported, citing people familiar with the matter.

The bank has already developed most of the supporting infrastructure required to handle the new form of payment and will be ready to launch it within less than a year of regulators giving it the go-ahead, the story said.

JPMorgan is set to revolutionize payments and settlements with a blockchain-based deposit token system. Pending regulatory approval, faster transactions and lower costs could become a reality for corporate clients within a year. This marks a significant step in the evolution of…

— Bincoti Trading (@Bincoti_Trading) September 8, 2023

New Deposit Tokens For Speedy Cross-Border Settlement

The new deposit tokens will first be launched for corporate clients to help speed up payments and settlements and reduce costs, especially to other banks and financial institutions, said Bloomberg’s source.

JPMorgan conducted a pilot last year in which it issued the tokens in a single transaction as a part of a project run by the Monetary Authority of Singapore (MAS), and released a report highlighting the potential use cases of the deposit tokens, the story said.

In another report written in collaboration with Oliver Wyman, the US bank noted that deposit tokens may offer more stability and reliability compared to similar solutions, such as stablecoins and central bank digital currencies.

“The reliability of deposits, backed by the issuer’s safety and soundness regulation, capital and liquidity requirements, access to contingency funding through the central bank, and strong consumer protection policies mean that deposit tokens are designed to be a money instrument at scale that promotes financial stability,” the report read.

Increased Stablecoin Competition

While they share some similarities with the JPM Coin, launched in 2019, deposit tokens are different. The JPM Coin, which is an internally used stablecoin pegged to the US dollar, enables clients to transfer euros and dollars to other clients within the bank, the Bloomberg story said.

The two are similar in that the deposit tokens’ infrastructure will also be connected to the bank’s existing compliance systems, it said. This will subject all the transactions made using these tokens to know-your-customer (KYC), anti-fraud, and other necessary checks as well as making them a part of the company’s regulatory reporting, it added.

The deposit tokens will probably initially be issued in US dollars but might later be made available in other fiat currencies if approved by applicable regulators, the story said.

The tokens will neither be designed for cryptocurrency purchases nor for use in place of stablecoins like Tether’s USDT, which are designed to maintain their 1:1 value to actual currency, to enter and exit the cryptocurrency market, or move digital assets across exchanges, said Bloomberg’s source .

With the deposit token project, JPMorgan not only broadens the scope of its blockchain-based services but also increases the level of competition for stablecoin issuers. Competition in the area has increased significantly, especially after PayPal released its stablecoin PayPal USD to support quicker settlements.