JP Morgan Explores Blockchain-Based Deposit Token for Payments

TL;DR

• JP Morgan is ready to launch deposit tokens for cross-border payments and settlements. All underlying infrastructure for the launch is set and awaits the U.S. regulator’s approval.
• The deposit tokens won’t be used for crypto transactions, replacing stablecoins, or moving assets across exchanges.

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American Monetary Giant, JP Morgan to Launch Deposit Token

Financial giant JP Morgan Chase is exploring using a type of token that will speed up its cross-border transactions.

It has developed all the infrastructure required to launch the new payment form and is waiting for the U.S. regulator’s approval.

*JPMORGAN CHASE $JPM IS DEVELOPING A BLOCK CHAIN-BASED DIGITAL DEPOSIT TOKEN TO SPEED UP CROSS-BORDER PAYMENTS

THOUGHTS? pic.twitter.com/EWlbE3jWq9

— Investing.com (@Investingcom) September 7, 2023

If approved, JP Morgan will launch the deposit token for its corporate clients within a year. This represents a deposit claim against a commercial bank.

Unlike JP Morgan Coin — a blockchain-based system, the deposit token will enable easy money transfers to clients of other banks.

“Deposit tokens bring plenty of potential benefits, but we also appreciate that regulators would want to be thoughtful and diligent before any product gets developed and used. Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly.”

JP Morgan spokesman reported.

Furthermore, the deposit token will settle trades for blockchain-issued tokenized securities, but it won’t replace stablecoins or buy cryptos.

Stablecoins are designed for settlements in the crypto space, but deposit tokens can serve similarly in traditional financial systems.

Deposit Tokens: A Bridge for Blockchain and Banking Integration

Deposit tokens will improve the overall digital currency ecosystem by providing a bridge between blockchains and traditional banking systems.

It offers great benefits over cash by making atomic or simultaneous settlement and programmability.

These aspects eventually speed up transactions and automate difficult payment processes.

It’ll naturally integrate into the banking processes since they’re commercial bank money represented in a new technical form.

They act as part of the banking ecosystem, subject to regulations and management applicable to commercial banks, mitigating risks of a run-on on deposit tokens and ensuring reliability.

New Deposit Tokens for Fast Cross-Border Settlements

The new payment form will connect the bank’s existing compliance systems to ensure all transactions undergo necessary assessment and regulatory reporting.

It will be denominated in dollars in its initial stages. But as it continues to function, the deposit token will become available to other fiat currencies if the authorities approve it.

In a report with Oliver Wyman, JP Morgan noted that the new payment form may provide more stability and reliability than similar solutions, like central bank digital currencies and stablecoins.

Since JP Morgan is the first financial bank to introduce its digital token for actual-world use, it supports Wall Street’s efforts to leverage blockchain technology to restructure banking services.

Exploring the Potential of Deposit Token

In the quest to launch deposit tokens, JP Morgan partnered with the Monetary Authority of Singapore on Project Guardian to assess the viability of applications in asset tokenization.

During this time, the duo assessed the securities’ representation using tokenized deposits from deposit-taking firms on public blockchains.

The financial giant admitted that such tokens could become widely used as a form of money in the digital asset ecosystem. They can even become widely used by stablecoins.

Has JP Morgan’s Deposit Token project increased competition for stablecoins issuers? The project has increased competition significantly, especially after PayPal released its stablecoin, PayPal USD, for fast settlements.

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