JPMorgan sees deposit token advantages over stablecoin for commercial bank blockchains

JPMorgan Chase and consultants Oliver Wyman took a look astatine blockchain exertion successful commercialized banking successful a study released Feb. 9. Stablecoin and cardinal slope integer currencies (CBDCs) person dominated successful this sphere truthful far, but the authors pointed retired the advantages offered by deposit coins for stableness and reliability.

Deposit tokens are issued connected a blockchain by a depository instauration to correspond a deposit claim. This contrasts to stablecoins, commonly issued by a non-bank backstage entity, and CBDCs. This quality successful issuer is simply a cardinal advantage:

“Given that deposit tokens are commercialized slope wealth embodied successful a caller method form, they beryllium comfortably arsenic portion of the banking ecosystem, taxable to regularisation and supervision applicable to commercialized banks today.”

Regulation, the report’s authors pointed out, contributes to spot and reduces the hazard of a tally connected deposit tokens, arsenic good arsenic assuring reliability.

Stablecoins comparison poorly successful this respect owed to the deficiency of standards for reserves and deficiency of clarity connected redemption rights. In addition, determination is simply a hazard of contagion successful the lawsuit of a tally connected a stablecoin, portion deposit coins, arsenic “extensions of accepted deposits” mightiness beryllium expected to defy that stress:

“Historical investigation of accepted deposits shows that deposits person been a dependable and reliable root of backing for commercialized banks passim economical cycles.”

Deposit tokens’ physics signifier offers advantages implicit currency money, specified arsenic programmability and atomic (simultaneous) colony that whitethorn “speed up transactions and automate blase outgo operations,” the study argued.

Related: Central slope of Bahrain trials JPMorgan’s blockchain and token

While deposit token exertion is comparatively undeveloped, it whitethorn inactive pass nascent CBDC technology, the study claimed, and service arsenic a “a earthy span for the integration of CBDCs into the banking system.”

JPMorgan Chase introduced its Onyx blockchain level on with its in-house JPM Coin successful 2020. It has trialed galore uses of the technology, including collateral settlement, repo trades and cross-border transactions.

1/3 Embrace, extend, extinguish? @OliverWyman & @jpmorgan renamed them deposit "tokens" (https://t.co/XDrHXxLrbq)...

— Christian Catalini (@ccatalini) February 10, 2023