Report: JPMorgan Chase Explores Blockchain for Cross-Border Payments

JPMorgan Chase is reportedly considering using blockchain technology to create a digital deposit token for faster cross-border payments and settlements, Bloomberg has reported, citing an anonymous source familiar with the matter.

Per the Thursday (Sept. 7) report, the U.S. bank has already developed the necessary infrastructure for the innovative payment system, which is now pending approval from U.S. regulators to proceed.

If approved, JPMorgan aims to launch the deposit token for use by its corporate clients within a year. Unlike JPM Coin, another blockchain-based system developed by the bank, the deposit token would enable easy money transfers to clients of other banks. Additionally, it would be suitable for settling trades of tokenized securities issued on a blockchain.

Deposit tokens, which are digital coins representing a deposit claim against a commercial bank, have the potential to transform the traditional financial system. For example, by utilizing blockchain technology, transactions can be processed instantaneously, leading to faster settlements and potentially reducing transaction costs.

The system would connect to the bank’s existing compliance systems to ensure transactions undergo necessary checks and regulatory reporting. Initially, the deposit token would likely be denominated in dollars, but it could become available in other fiat currencies if relevant regulators approve it.

As the first major U.S. bank to introduce its own digital token for real-world use, J.P. Morgan has been at the forefront of Wall Street’s efforts to leverage blockchain technology to streamline banking processes. It said in February 2019 that the blockchain-based cryptocurrency is designed to enable “the instantaneous transfer of payments between institutional accounts.”

More recently, in February, the bank noted its commitment to tokenize traditional finance despite upheaval in the cryptocurrency sector.

At the time, the bank’s digital asset program, Onyx, was already being used by Goldman Sachs, DBS Bank and BNP Paribas, with 15 other banks and broker-dealers looking to sign up for it, PYMNTS reported, per CoinDesk.

“We think that tokenization is a killer app for traditional finance,” Onyx program head Tyrone Labbone said.