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JP Morgan Investigates Blockchain-Backed Deposit Token for Accelerated International Transactions: Report
The American financial services powerhouse JP Morgan is investigating a novel type of token aimed at accelerating its cross-border payments and settlements.
Sources familiar with the situation informed Bloomberg that the global financial services company has established most of the essential infrastructure required to introduce a deposit token. Nevertheless, the organization is awaiting approval from U.S. regulatory bodies.
JP Morgan to Introduce Deposit Token
A deposit token is a digital currency that functions as a deposit claim against a commercial bank. They represent digital equivalents of the deposits maintained in customer accounts. Initially, the token may be denominated in dollars, with plans to expand to other fiat currencies over time.
JP Morgan does not plan to utilize the token as a substitute for stablecoins or for acquiring cryptocurrencies. While stablecoins are intended for transactions within the crypto sector, deposit tokens fulfill comparable roles in the conventional financial system.
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If JP Morgan secures regulatory approval, the bank could roll out the token for corporate clients within a year. The organization aims to make traditional settlements faster and more cost-effective with this new offering.
“Deposit tokens offer numerous potential advantages, but we also recognize that regulators would want to be careful and thorough before any new product is developed and utilized. If that interest arises, our blockchain infrastructure would be capable of supporting the launch of deposit tokens relatively swiftly,” stated a spokesperson for JPMorgan.
Investigating the Potential of Deposit Tokens
The introduction of a deposit token would mark a significant advancement in JP Morgan’s blockchain initiatives. In 2022, the bank collaborated with the Monetary Authority of Singapore on its Project Guardian to assess the viability of applications in asset tokenization. During the pilot phase, the two parties explored the representation of securities using tokenized deposits issued by deposit-taking institutions on public blockchains.
In a report released earlier this year, JP Morgan emphasized the potential inherent in deposit tokens. The bank indicated that such tokens could evolve into a commonly utilized form of currency within the digital asset ecosystem and may even see increased adoption compared to stablecoins.
Importantly, the deposit token would not operate in the same manner as JP Morgan’s JPM Coin, which was created in 2019 to facilitate the movement of dollars and euros for corporate clients. The token’s infrastructure would be integrated with the bank’s compliance systems.
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