JPMorgan is exploring blockchain-based deposit tokens to speed up cross-border payments

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(Kitco News) – JPMorgan Chase & Co. is reportedly in the early stages of exploring creating a blockchain-based digital deposit token designed to speed cross-border payments and settlements, fueling optimism that greater institutional adoption of the Blockchain technology is on the horizon.

According to a report from Bloomberg, the US’s largest bank by assets has already developed most of the underlying infrastructure required to operate the new payment instrument, but is awaiting final approval from US regulators before actually creating the token.

A source familiar with the matter, who did not want to be named, said that once the bank receives approval, it is likely to launch the product for corporate customers within a year.

A deposit token is a transferable digital coin that represents a deposit claim against a commercial bank and essentially serves as a digital version of customers’ deposits in their accounts. The fact that deposit tokens run on blockchain networks makes them more accessible than traditional deposits, as settlement is instant and they have the potential to make transactions more cost-effective.

“Deposit tokens bring numerous potential benefits, but we also appreciate that regulators want to exercise caution and due diligence before developing and using a new product,” a JPMorgan spokesperson said in a statement. “Should this appetite develop, our blockchain infrastructure would be able to support the adoption of deposit tokens relatively quickly.”

JPMorgan is one of the most active global financial institutions in exploring use cases for blockchain technology and finding ways to integrate it into their business operations.

Last November, the bank participated in the Monetary Authority of Singapore’s Project Guardian, in which JPMorgan, Singapore’s DBS Bank and Japan’s SBI Digital Asset Holdings conducted foreign exchange and government bond transactions against liquidity pools consisting of tokenized Japanese government bonds, Japanese yen (JPY) and Singapore Dollar (SGD).

JPMorgan is now looking to expand its blockchain efforts even further as institutional adoption of blockchain and cryptocurrencies increases, as evidenced by recent filings of several crypto-related exchange traded funds (ETF) applications from some of the world’s largest asset managers. including BlackRock and Fidelity.

While many businesses are still hesitant to delve into crypto, it is becoming increasingly undeniable that blockchain can simplify some of the more cumbersome processes in banking and provide greater levels of transparency and efficiency.

“It’s another sign that major companies are continuing to expand their blockchain capabilities during this bear market,” said Markus Thielen, head of research and strategy at Matrixport.

It is worth noting that this new product is different from the bank’s JPM Coin, released in 2019 and already used by corporate clients to transfer dollars and euros within the financial institution. The main difference is that the new deposit token enables transactions with other banks and is suitable for various forms of settlement on a blockchain, including trading in tokenized securities.

The bank said in June that JPM Coin had processed around $300 billion worth of transactions since its launch.

The source said the new deposit token would likely initially be denominated in US dollars, but could later be offered in other fiat currencies with regulatory approval. It is not intended to purchase cryptocurrencies or replace stablecoins. Deposit tokens are intended solely for use in the traditional financial system for payments, settlements and similar functions.

“As digital transactions become increasingly large and complex, deposit tokens can become a strong foundation for digital money and an important part of a broader tokenized asset ecosystem,” JPMorgan said in its report on deposit tokens. “Their technical features, alignment with established banking regulatory frameworks and natural integration with financial services across the banking sector make deposit tokens a stabilizing anchor within the digital money landscape, while ushering in a new era of improvement for commercial banks.” Money, the world’s most widely used form of money .”

“We believe that deposit tokens will become a widely used form of money in the digital asset ecosystem, just as commercial bank money in the form of bank deposits now accounts for over 90% of money in circulation,” they said. “The token form will benefit from connectivity to traditional banking infrastructure and regulatory safeguards that already support commercial bank deposits.”

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