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JPMorgan is inching closer to a new era in digital finance, according to a recent report on September 8th. Additionally, a deposit token built on the blockchain is in the final development phases despite the rollout being contingent on U.S. regulatory approval. Significantly, this new product will initially target corporate clients, aiming to expedite settlements and payments.
Deposit Token vs. Stablecoin
Unlike stablecoins, usually issued by non-banking entities, a depository institution will issue JPMorgan’s deposit token. Additionally, the deposit token diverges from the bank’s existing JPM Coin.
The latter only enables transactions within JPMorgan, whereas the new token will allow transactions with other banks. Moreover, it will be suitable for various blockchain-based settlements, including trades in tokenized securities.
Compliance and Regulatory Hurdles
JPMorgan has already laid most of the groundwork for this innovation. Last year, the deposit token was piloted in a collaborative project by the Monetary Authority of Singapore. Like JPM Coin, the new token will adhere to compliance measures. Hence, all transactions will go through know-your-customer and anti-fraud processes.
A spokesperson for JPMorgan emphasized the bank’s cautious optimism;
“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,” they said.
This development adds another layer to the ongoing competition among crypto tokens to speed up financial settlements. Besides JPMorgan, PayPal recently launched its stablecoin, PYUSD, to get a slice of the pie. Consequently, established players like Circle are broadening the reach of their offerings to stay competitive.
According to Umar Farooq, CEO of JPMorgan’s web3 arm Onyx, deposit tokens on public blockchains are “the next step in the evolution of digitized commercial bank money.”
JPMorgan’s move into blockchain-based deposit tokens isn’t just a leap forward for the bank but also a significant marker for the financial industry. Although the system will be operational once regulatory approval is obtained, JPMorgan’s readiness suggests that the impact on cross-border transactions could be transformative once the green light is given.
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