JPMorgan Chase & Co., the largest bank in the US, is exploring the use of blockchain technology to create a digital deposit token, to make cross-border payments and settlements faster and more efficient.
JPMorgan has been working on building the necessary infrastructure for a project that involves creating a digital deposit token. However, they wouldn’t proceed with this project and create the token until they receive approval from U.S. regulators. Once they get the green light, they aim to launch the project for their corporate clients within a year.
A JPMorgan spokesperson said, “Deposit tokens bring plenty of potential benefits, but we also appreciate that regulators would want to be thoughtful and diligent before any new product gets developed and used,” in a statement.
Deposit tokens are transferable digital coins that function as digital representations of deposit claims held against commercial banks and function on a blockchain, providing quick settlements and potential cost savings.
The bank had previously developed various applications using blockchain. It introduced JPM Coin in 2019 to allow some JPMorgan corporate clients to move dollars and euros from their various accounts within the bank.
In June, the bank said that it has utilized the system to handle around $300 billion worth of transactions since its launch. By comparison, JPMorgan handles $10 trillion in US dollar transactions every single day.
The deposit token would work differently from JPM Coin, as it provides easy money transfers to clients of other banks. Initially, the deposit token would probably be valued in US dollars, but it might later be made accessible in other fiat currencies like euros or yen.
These tokens are not for buying cryptocurrencies or replacing stablecoins like Tether’s USDT. Stablecoins are supposed to always be worth the same as a regular currency (1:1), and traders use them to move in and out of the cryptocurrency market or transfer digital assets between different platforms.
Instead, Deposit tokens are created mainly to be used within the regular financial system, for payments, settlements, and similar functions.
In a recent study, JPMorgan said, “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.”