JPMorgan sees deposit token advantages over stablecoin for commercial bank blockchains

Research from JP Morgan Chase explores the potential of deposit tokens as a stabilizing force in the digital money landscape.

JPMorgan Chase and consultants Oliver Wyman took a look at blockchain technology in commercial banking in a report released Feb. 9. Stablecoin and central bank digital currencies (CBDCs) have dominated in this sphere so far, but the authors pointed out the advantages offered by deposit coins for stability and reliability.

Deposit tokens are issued on a blockchain by a depository institution to represent a deposit claim. This contrasts to stablecoins, commonly issued by a non-bank private entity, and CBDCs. This difference in issuer is a key advantage:

“Given that deposit tokens are commercial bank money embodied in a new technical form, they sit comfortably as part of the banking ecosystem, subject to regulation and supervision applicable to commercial banks today.”

Regulation, the report’s authors pointed out, contributes to trust and reduces the risk of a run on deposit tokens, as well as assuring reliability.

Stablecoins compare poorly in this regard due to the lack of standards for reserves and lack of clarity on redemption rights. In addition, there is a risk of contagion in the event of a run on a stablecoin, while deposit coins, as “extensions of traditional deposits” might be expected to resist that stress:

“Historical analysis of traditional deposits shows that deposits have been a steady and reliable source of funding for commercial banks throughout economic cycles.”

Deposit tokens’ electronic form offers advantages over cash money, such as programmability and atomic (simultaneous) settlement that may “speed up transactions and automate sophisticated payment operations,” the report argued.

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

While deposit token technology is relatively undeveloped, it may still inform nascent CBDC technology, the report claimed, and serve as a “a natural bridge for the integration of CBDCs into the banking system.”

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


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