JP Morgan’s exploration into tokenised deposits reaffirms its stance they are more scalable and potentially profitable than stablecoins
JP Morgan has officially launched its tokenised deposit currency, JPM Coin, for institutional clients to begin settling transfers via blockchain technology.
JPM Coin is powered by Base, the Ethereum Layer-2 public blockchain built within Coinbase, enabling clients to send payments domestically and internationally in seconds 24/7, removing the friction often associated with traditional payment settlement times.
All JPM Coin deposit tokens are 1:1 backed by the US dollar.. Despite being digital representations of bank deposits, it is unclear and not officially stated by JP Morgan if JPM Coin earns interest.
The US bank announced the launch of a JPM Coin pilot phase in June after it settled its first transfer of JPM Coin to Coinbase’s accounts. On November 12, after the successful proof of concept with Mastercard, Coinbase and B2C2, the bank made the asset available to institutional clients.
“We built Base to be a fast, cheap, and secure public blockchain, which can help reduce cost, enhance efficiency, and improve liquidity,” says Lauren Abendschein, VP of Institutional Sales at Coinbase.
“Coinbase is a longtime J.P. Morgan institutional client, and the ability to use JPM Coin on Base is helping to bring institutional money into the global on-chain economy.”
The deposit token had initially been used within JP Morgan’s internal network to instantly settle payments on a closed blockchain ledger. Early performances found JPM Coin had processed large daily volumes and demonstrated that it could be used for real-time bank settlements.
“Collaborating with Kinexys by JP Morgan to bring JPM Coin to the Mastercard Token Network marks a milestone in our strategy to build an open, interoperable network for digital assets and bank deposit,” said Raj Dhamodharan, Executive Vice President of Blockchain & Digital Assets at Mastercard.
“This integration delivers secure, streamlined access to on-chain payments for our shared customers and the broader industry, backed by Mastercard’s principled approach to trust, security and compliance.”
JPM Coin is the latest offering in JP Morgan’s digital asset strategy and one of several global banks exploring use cases and the benefits of tokenised deposits, including Citi Bank and Deutsche Bank.
DBS Bank tokenised deposit pilot
While not officially stated by JP Morgan, JPM Coin could soon be used as part of the US banks’ co-pilot programme with DBS Bank to unearth new capabilities for multi-currency, cross-border payments with tokenised deposits.
Both banks announced the pilot launch on November 11 and will see a framework established for the transferring of cross-border payments on both DBS Token Services and Kixeys Digital Payments services.
Use cases will see how DBS’ institutional clients in Southeast Asia can pay JP Morgan’s customers in the US via tokenised deposits, being able to exchange or redeem them on either banking platform at any time on any day, regardless of time zone constraints.
Interoperability of multi-currency tokenised deposits, such as the USD denominated JPM Coin, could potentially provide near-instant settlement of cross-border transactions 24/7, outside the constraints of time zone differences.
Tokenised deposits superior to stablecoins?
In an interview for the pilot launch of JPM Coin, Naveen Mallela, Global Co-Head of Kinexys by JP Morgan, revealed to Bloomberg that the bank views tokenised deposits as a “superior alternative to stablecoins”.
While stablecoin adoption has surged over the past year, reaching a global market cap of just under $300bn, banks like JP Morgan are favouring tokenised deposit payments over stablecoins as they exist within regulatory frameworks, with limits and liquidity controlled by the banks themselves.
Mallela highlighted that tokenised deposits also enable JP Morgan to scale them at a greater rate as it relies on “fractional banking”. She also hinted at the possibility of interest bearing tokenised deposits in the future as a replacement for deposit insurance. Under regulatory standards, such as those within the US’ GENIUS Act, stablecoin issuers are prohibited from earning interest yield.
