In a move to transform its payment systems, banking giant JPMorgan Chase (NYSE:JPM) is reportedly considering the use of a blockchain-based digital deposit token. The aim is to expedite cross-border payments and settlements, according to a source cited by Bloomberg on Sunday.
The bank has already developed most of the infrastructure required for the project but will not create the actual token unless it receives approval from U.S. regulators. The new offering could be used to send money to clients of other banks and settle trades of tokenized securities.
JPMorgan has been using a digital token, known as JPM Coin, for several years, enabling corporate clients to move funds in dollars and euros within the bank. However, this new development could expand the reach of digital tokens beyond JPMorgan's internal operations.
"Deposit tokens bring plenty of potential benefits, but we also appreciate that regulators would want to be thoughtful and diligent before any new product gets developed and used. Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly," a bank spokesperson said in a statement to Bloomberg.
Since its inception in 2015, JPMorgan has been at the forefront of blockchain experimentation. The bank introduced its private network, Quorum, based on Ethereum. Quorum supports self-executing agreements known as smart contracts, enabling automated business processes. It empowers JPMorgan to develop tailor-made applications for various use cases, including trade finance, capital markets, and asset management.
Among the applications built on Quorum is JPM Coin, a digital currency that facilitates instantaneous cross-border payments. Backed by U.S. dollars held in JPMorgan's accounts, JPM Coin can be freely exchanged for other currencies or assets on the blockchain. Currently undergoing rigorous testing by a select group of clients, JPM Coin aims to enhance international payments' speed, efficiency, and security.
JPMorgan plans to expand the usage of JPM Coin to encompass additional markets and currencies, and explore other applications of Quorum, like asset tokenization, smart contracts, and decentralized finance. This move signifies a significant milestone in adopting blockchain technology within the banking sector.
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