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Financial powerhouse JPMorgan is making another foray into the cryptocurrency sector with a new blockchain-driven solution for international transactions, according to a report by Bloomberg. However, this system will not be operational until the bank obtains approval from U.S. regulators.
JPMorgan has allegedly constructed the majority of the infrastructure necessary to operate the new deposit token, which will initially be introduced for corporate clients to enhance the speed of payments and settlements. Deposit tokens are created on a blockchain by a depository institution to signify a deposit position. This solution differs from stablecoins, which are typically issued by non-bank private entities.
This product also stands apart from JPM Coin, which currently enables corporate clients to transfer dollars and euros within the financial institution. In contrast, the new deposit token will facilitate transactions with other banks and is designed for various types of settlements on a blockchain, including the trading of tokenized securities.
Nevertheless, the deposit token shares compliance features with JPM Coin, as its transactions will undergo know-your-customer and anti-fraud protocols. Last year, the new token was tested in a single transaction as part of Project Guardian, a collaborative initiative led by the Monetary Authority of Singapore (MAS).
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1/3 Embrace, extend, extinguish? @OliverWyman & @jpmorgan renamed them deposit “tokens” (https://t.co/XDrHXxLrbq)…
— Christian Catalini (@ccatalini) February 10, 2023
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“Deposit tokens offer numerous potential advantages, but we recognize that regulators would want to proceed with caution and thoroughness before any new product is developed and utilized,” a JPMorgan representative stated to Bloomberg, adding that “if that interest materializes, our blockchain infrastructure would be capable of supporting the launch of deposit tokens relatively swiftly.” According to the report, JPMorgan processes $10 trillion in transactions daily.
The bank has previously expressed its support for deposit tokens. In February, JPMorgan indicated that deposit tokens might provide greater stability and reliability compared to comparable solutions, such as stablecoins and central bank digital currencies (CBDCs).
JPMorgan’s deposit token initiative not only broadens its blockchain-based offerings but also intensifies competition among stablecoin issuers. Another significant player that recently entered the race for expedited settlements using crypto tokens is PayPal. The fintech company introduced its stablecoin (PYUSD) in early August, prompting traditional rivals in the U.S. market, such as Circle, to extend the reach of its stablecoin USD Coin (USDC) to six additional blockchains to enhance adoption.
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