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Blockchain technology: JPMorgan CEO Jamie Dimon (right) at a business forum in Miami. JPMorgan, one of the most active financial firms in blockchain, already runs a network called Kinexys Digital Payments. — AP
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NEW YORK: JPMorgan Chase & Co has started rolling out a deposit token called JPM Coin to institutional clients, a move that comes as financial institutions continue to broaden their footprint in digital assets.
The token, which represents US dollar deposits at the world’s largest bank, allows users to send and receive money via Coinbase Global Inc affiliated public blockchain Base, Naveen Mallela, global co-head of the bank’s blockchain division Kinexys, said in an interview.
This enables payments to be processed in seconds and 24/7, rather than in days and during working hours.
The launch follows a trial period for JPM Coin over the past few months, which involved firms such as Mastercard, Coinbase and B2C2, the companies said in a statement.
The bank plans to make the token accessible to clients of its clients at a later stage and expand to other currency denominations, pending approval from regulators, Mallela said.
It also intends to expand to other blockchains, he added. Plans for a pilot period for JPM Coin, whose ticker is JPMD, were first announced in June.
The bank has trademarked the ticker JPME for a potential future launch of a euro-denominated deposit token, Mallela said.
The launch marked a significant expansion of JPMorgan’s blockchain efforts and comes as global banks and large companies, including Citigroup Inc, Banco Santander, Deutsche Bank and PayPal Holdings Inc experiment with ways to use digital assets to make payments faster and cheaper.
It follows the passage of the Genius Act in the United States, which regulates stablecoins, another increasingly popular form of digital money.
Deposit tokens are digital coins issued by commercial banks that represent a claim on existing customer deposits.
In essence, they’re tokenised versions of money already sitting in bank accounts, designed to move more easily using blockchain networks.
They differ from stablecoins, which are typically pegged to fiat currencies and backed one-to-one by assets such as government bonds or other liquid assets.
“We think that stablecoins get a lot of buzz, but for institutional clients, deposit-based products offer a compelling alternative,” Mallela said. “These can be yield-bearing.”
Other banks, including Bank of New York Mellon Corp and HSBC Holdings Plc, are currently exploring or have already launched deposit token services.
While stablecoin issuers earn yields from the assets they hold as reserves to back their token, these are not typically passed on to coin holders.
By contrast, deposit tokens can pay holders interest for their bank deposits, making them attractive for those with large balances, such as cryptocurrency trading firms that use stablecoins to move money in and out of positions and as collateral.
JPM Coin will be accepted as collateral on Coinbase, Mallela said.
While financial firms have been experimenting with blockchain technology for more than a decade, few applications have become commercially viable, and overall usage is dwarfed by the amounts processed in traditional markets.
JPMorgan, one of the most active financial firms in blockchain, already runs a network called Kinexys Digital Payments, which allows corporate clients to move US dollars, euros and pounds at the bank.
JPMorgan said the network processes an average of more than US$3bil in transactions a day, compared to the roughly US$10 trillion a day its payments division handles on a daily basis. — Bloomberg
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