JPMorgan’s Latest Research Indicates Growing Support for Tokenized Deposits
JPMorgan’s latest research suggests that international regulators are increasingly favoring tokenized bank deposits over stablecoins, particularly those that maintain the stability and structure of fiat-based banking systems. This shift in preference reflects a desire within traditional finance to leverage digital technologies while upholding core regulatory and systemic safeguards.
According to a report by JPMorgan, financial regulators outside the United States, including the Bank of England, are showing a preference for digital instruments issued by commercial banks that are fully integrated within the existing financial system. These tokenized deposits operate on blockchain infrastructure while retaining the foundational protections of traditional deposits, such as access to central bank liquidity, capital buffers, and compliance with anti-money laundering regulations.
The research, led by JPMorgan’s Nikolaos Panigirtzoglou, highlights the trend towards non-transferable tokenized deposits, also known as non-bearer deposits, which are settled between accounts at full face value. These instruments minimize the risk of price deviation and maintain uniformity across forms of money, promoting the concept of the “singleness of money.”
In contrast to stablecoins and transferable digital deposits, which can be subject to market fluctuations, non-bearer deposits offer greater stability and control. JPMorgan’s analysis underscores the concerns surrounding the potential volatility of privately issued digital currencies and the importance of preserving the integrity of the financial system.
While stablecoins remain popular in crypto markets for their ease of transfer and liquidity, they often rely on the backing of traditional banking systems, such as investments in short-term government debt. This integration with the regulated financial framework ensures that stablecoins do not represent a complete departure from traditional banking structures.
Regulators in regions like the UK have questioned the feasibility of allowing commercial banks to issue stablecoins under frameworks that require them to hold central bank reserves without generating yield. This could diminish incentives for banks to issue their own stablecoins, as noted in JPMorgan’s analysis.
In contrast, U.S. policymakers are moving towards a more open approach to integrating stablecoins within the financial ecosystem. The potential passage of the GENIUS Act, spearheaded by President Donald Trump, would enable banks to issue stablecoins directly and promote their use in domestic payments.
JPMorgan is actively exploring tokenized solutions through JPMD, a permissioned deposit coin currently in pilot on Base. The bank has also been experimenting with stablecoins behind closed doors and filed a trademark for a deposit token product in June, indicating potential applications in settlement, programmable finance, and cross-bank transfers.
Overall, JPMorgan’s research sheds light on the evolving landscape of tokenized deposits and the regulatory considerations driving the adoption of digital instruments within traditional banking systems. As international regulators continue to navigate the intersection of digital technologies and financial stability, the role of tokenized deposits in shaping the future of banking remains a key area of focus.