JPMorgan supports the blockchain adoption with its latest move. The bank started rolling out a deposit token called JPM Coin (JPME) to its institutional clients.
JPM Coin represents dollar deposits at JPMorgan, and it allows users to send and receive money via the Base blockchain, according to Naveen Mallela, the global co-head of the bank’s blockchain division Kinexys. JPM Coin will be accepted as collateral on Coinbase.
The bank’s move enables payments to process 24/7 in seconds, compared to traditional transactions, which can last for days, and can be made only during working hours.
Mallela believes that while stablecoins are popular, institutional clients would prefer deposit-based products as an alternative due to their yield-bearing nature.
Banks like Bank of New York Mellon Corp. and HSBC Holdings are currently exploring or have already launched deposit token services.
JPM Coin has been under a trial period for the past months with Mastercard, Coinbase, and B2C2 companies.
The token is available to institutional investors of JPMorgan’s clients, and in the future, it will expand to other blockchains and currencies besides the US dollar, following regulators’ approval.
The JPME launch plans were revealed in June, according to Bloomberg reports.
A deposit token is a digital coin issued by commercial banks, representing a claim on existing customer deposits; it’s a tokenized version of money that’s already in bank accounts designed to move more easily via blockchains.
The difference between a deposit token and a stablecoin is that a stablecoin is pegged to fiat and backed one-to-one by assets, including government bonds or other high liquidity assets.
Stablecoin issuers can earn yields from the assets they hold as reserves to back them, but these yields are not passed on to the coin holders.
On the other hand, deposit tokens can pay holders interest from their bank deposits, making them more attractive for companies with larger balances, including crypto trading firms that use stablecoins to move money in and out of positions as collateral.
The latest launch of the bank marks an expansion of JPMorgan into the Web3 industry, amidst rising adoption from other traditional financial players like Citigroup, Banco Santander, Deutsche Bank, and PayPal.
Financial firms have been experimenting with blockchain tech for over a decade, but just a few applications have become commercially viable.
JPMorgan has become one of the most active TradFi firms in the blockchain industry, and it runs a network called Kinexys Digital Payments, allowing corporate clients to move US dollars, euros, and pounds at the bank. The network can reportedly process an average of over $3 billion in transactions daily.
JPME’s launch comes following the GENIUS Act in the US, which brought clearer regulations for stablecoins, an important link between DeFi and TradFi.
