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JP Morgan touts bank-issued deposit tokens

JP Morgan touts bank-issued deposit tokens

Blockchain-based deposit tokens, rather than stablecoins, could emerge as the foundation for stable digital money, according to a report from JP Morgan and Oliver Wyman.

Stablecoins have often been touted as the future of digital money but, according to the report, the alternative bank-issued deposit token could prove more successful.

Deposit tokens are transferable tokens issued on a blockchain by a licensed depository institution which evidence a deposit claim against the issuer.

Because the tokens are commercial bank money embodied in a new technical form, they sit comfortably as part of the banking ecosystem, subject to the regulation and supervision applicable to commercial banks today, say the authors.

In their token form, commercial bank deposits can bring a number of technical advantages to payments and transaction settlement including programmability, 24/7 transferability, as well as faster and more direct fund flows between counterparties.

Basak Toprak, global product head, digital tokens, Onyx by JP Morgan, says: “The digital money landscape is still emerging and various types of digital money will compete to serve different use-cases. We believe deposit tokens will become a widely used form of money within the digital asset ecosystem alongside central bank digital currencies.”

Ugur Koyluoglu, global head, digital assets, Oliver Wyman adds: “Unlike stablecoins, deposit tokens also benefit from connectivity to traditional banking infrastructures and regulatory safeguards that already support bank deposits.”

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