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According to sources familiar with the matter, JPMorgan Chase, the largest bank in the United States by assets, is in the early stages of exploring blockchain digital deposit tokens with the hope of accelerating cross-border payments and settlements. The infrastructure has been developed, but the token won't be created until it receives regulatory approval in the United States. JPMorgan may launch a product for corporate customers within a year of obtaining approval.
Deposit tokens are convertible digital tokens that represent deposits held in a commercial bank. In essence, they are digital versions of customer account deposits. Since transactions using these tokens are processed on the blockchain, settlements are instantaneous, which could potentially reduce transaction costs.
A spokesperson for JPMorgan stated, "Deposit tokens offer many potential benefits, but we also understand that regulators want to carefully consider and review before any new product is developed and used. If interest in such a product grows, our blockchain infrastructure will support the introduction of deposit tokens relatively quickly."
JPMorgan had previously experimented with issuing deposit tokens as part of the Monetary Authority of Singapore's Project Guardian, and recent research highlighted the potential of this currency form.
This move reflects JPMorgan's expansion into blockchain technology and its efforts to simplify some of the complex processes in the banking industry using cryptocurrency-based technology. While the banking industry has been experimenting with blockchain technology for nearly a decade, skeptics have questioned its practical utility in the financial sector.
How Is It Different from JPMCoin?
JPMorgan has developed several applications using blockchain technology. The bank operates a JPMCoin system that allows some of its corporate clients to transfer dollars and euros between various JPMorgan accounts. The bank stated in June that this system, introduced in 2019, has been used to process around $300 billion in transactions. To put this into perspective, JPMorgan's daily total dollar transaction volume is $10 trillion.
Sources familiar with the matter have indicated that deposit tokens have different functionality compared to JPMCoin. They can be used for easy remittances to another bank's customer and are suitable for settling transactions involving tokenized securities or financial instruments issued on the blockchain. However, both systems will connect to JPMorgan's existing compliance systems, allowing transactions to undergo Know Your Customer (KYC), anti-fraud, and other necessary checks, becoming part of the company's regulatory reporting.
Deposit tokens are initially expected to be denominated in US dollars, but other fiat currency forms may be introduced later, subject to regulatory approval. Furthermore, these deposit tokens are not designed for purchasing cryptocurrencies or replacing stablecoins like USDT; they are intended for use within the traditional financial system for payments, settlements, and similar functions.
JPMorgan's recent research states, "We believe deposit tokens will become a widely used form of currency in the digital asset ecosystem, just as commercial bank money in the form of bank deposits accounts for over 90% of the circulating money supply today." |
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Post time 12-9-2023 06:23:29
