JPMorgan Suggests That Deposit Tokens Provide More Benefits Over Stablecoins for Commercial Bank Blockchains

In a paper issued on February 9, JPMorgan Chase and consultants Oliver Wyman examined the use of blockchain technology in commercial banking. Despite the market previously being dominated by stablecoins and central bank digital currencies (CBDCs), the authors emphasize the advantages deposit coins offer in terms of stability and reliability.

To represent a deposit claim, a depository institution creates deposit tokens on a blockchain. As opposed to this, private non-bank organizations regularly develop stablecoins and CBDCs. This differentiation between the issuers is a significant benefit.

The Study Shows Deposit Tokens are More Advantageous

The authors of the study emphasize that regulation increases dependability, fosters confidence, and lowers the possibility of a run on deposit tokens The lack of reserve restrictions and the ambiguity surrounding redemption rights make stablecoins inferior in this regard. Furthermore, there is a chance that a stablecoin run may spread, but deposit coins, as “extensions of traditional deposits,” might be anticipated to withstand that pressure.

The study argues that the electronic form of deposit tokens offers advantages over cash, such as programmability and atomic (simultaneous) settlement, which may “speed up transactions and automate difficult payment operations.

JPMorgan Chase is Insistent on the Outcomes of This Research

JPMorgan Chase is Insistent on the Outcomes of This Research

Although the technology behind deposit tokens is still in its infancy, the research asserts that it may nevertheless have a bearing on CBDC development and provide “a natural bridge for the integration of CBDCs into the banking system.”

JPMorgan Chase introduced the Onyx blockchain technology and its own JPM Coin in 2020. It has tested many applications of the technology, including cross-border trading, repurchase agreement trades, and collateral settlement.

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Pieter Aven

Pieter Aven is a business and financial journalist based in Boston covering stories at the intersection of business, technology and finance. He holds a degree in Germanic languages from the University of Brussels and a degree in journalism from Boston University.

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