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JPMorgan Chase & Co, the largest bank in the US, is developing a new type of digital currency that can accelerate settlements and international payments, according to a source close to the subject.
A New Digital Deposit Token
The source, who wished to stay anonymous as the project is in its early stages, stated that the bank is investigating using a blockchain-based deposit token. The token would act as a transferable digital currency, representing a deposit claim against it. The source also added that while the infrastructure for the new payment system is in place, it will wait for approval from regulators before developing the token. If regulators grant approval, JPMorgan could launch the product for its corporate clients within a year of regulatory clearance.
“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. Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly.”
The deposit token will be an expansion of JPMorgan’s blockchain push, which also includes another blockchain system, JPM Coin. However, unlike JPM Coin, the deposit token will facilitate easy money transfers to clients of other banks. It would also be highly suited for settling trades of tokenized securities issued on the blockchain.
Deposit Tokens Could Transform Financial System
Deposit tokens are digital coins that represent a claim against a commercial bank and can transform the traditional financial system. By using blockchain technology, transactions can be processed instantaneously and lead to significantly faster settlements while reducing transaction costs. The new system would also be connected with the bank’s existing compliance systems, ensuring all transactions are subject to necessary checks and regulatory reporting.
The deposit token will initially be denominated in Dollars. However, it could become available in other currencies following approval from the relevant regulatory authorities. The potential launch of a new blockchain-based deposit token comes at a time when there is growing speculation in the market that regulators in the US may be favoring established Wall Street firms when initiating action against crypto companies.
Expanding Use Of JPM Coin
JPMorgan is the first major bank in the US to launch its own digital token for real-world use. The launch of the deposit token also comes at a time when the bank is moving to expand the usage of the JPM Coin, the blockchain-based settlement token. JPM Coin acts as a payment rail and deposit account ledger, allowing users to transfer fiat money held with the bank. JPMorgan has stated that since its launch, JPM Coin has facilitated transactions worth over $300 billion. This makes it one of the most prominent examples of the use of blockchain technology by a traditional financial institution.
The bank had revealed last year that clients had begun using its cryptocurrency to settle payments across the world instantly. It facilitates the transfer of payments between institutional clients. However, the coin is currently available only for corporate clients that have undergone strict regulatory checks.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.