America’s biggest bank by assets, JPMorgan Chase, is exploring a blockchain-based deposit token for cross-border payments and interbank transfers. If approved by regulators, the banking giant may create the digital asset, which would be different from its existing JPM Coin as it could be used to send money to accounts in other banks.
JPMorgan Considers Digital Token for Cross-Border Payments and Settlement
JPMorgan is in the early stages of exploring a blockchain-based digital deposit token, Bloomberg reported quoting a person with knowledge of the matter. The token could be used to speed up cross-border payments and settlement.
According to the source who chose to remain anonymous, most of the underlying infrastructure that would be necessary to run the new means of payment has been developed. However, the token will not be issued without U.S. regulatory approval.
The bank may launch it less than a year after it gets a green light and offer it to corporate clients, the report unveils. JPMorgan has already issued deposit tokens as part of the Monetary Authority of Singapore’s Project Guardian last year and highlighted their potential in a study:
We believe deposit tokens will become a widely used form of money within the digital asset ecosystem, just as commercial bank money in the form of bank deposits makes up over 90% of circulating money today.
Deposit tokens represent a deposit claim against a commercial bank, a digital version of deposits held by customers in their accounts. The tokens can be transferred and as their transactions are processed on a blockchain, settlement can be instantaneous and arguably cheaper. A JPMorgan spokesperson has been quoted as elaborating:
Deposit tokens bring plenty of potential benefits, but we also appreciate that regulators would want to be thoughtful and diligent … Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly.
JPMorgan has been at the forefront of Wall Street’s attempt to employ the technology that underpins cryptocurrencies, the report notes. The issuance of a deposit token would expand the banking behemoth’s efforts in the sphere of blockchain.
So far, JPMorgan has developed several applications utilizing blockchain, including the JPM Coin, which was announced a few years ago. It allows some of the financial institution’s corporate clients to move dollars and euros from their various accounts within the bank.
However, a deposit token would differ in that it could be easily used to send money to clients of other banks, Bloomberg’s source pointed out. It can also facilitate the settlement of trades of tokenized securities or financial instruments issued on a blockchain.
The token, users of which will be subject to know-your-customer and other checks, would most likely be denominated in U.S. dollars initially but could later become available in other fiat currencies. And it should be noted that its purpose would not be to purchase cryptocurrencies or replace fiat-pegged stablecoins.
Do you think JPMorgan would get a regulatory nod to issue a digital deposit token? Share your expectations in the comments section below.