Analysts suggest using deposit tokens for commercial bank blockchain products as a more stable alternative to stablecoins.
Analysts at JPMorgan Chase and the consulting firm Oliver Wyman released a report suggesting that deposit tokens should be considered the basis for stable digital money and commercial banking based on blockchain technology.
Deposit tokens are a tokenized form of ownership of money placed in a bank account as a deposit. Tokens in the blockchain network are issued by a licensed depository institution, which acts as a guarantor of financial obligations to the holders of the asset.
In fact, “deposit tokens are commercial bank money embodied in a new technical form,” making them “part of the banking ecosystem.” The report claims that the programmability of this form of money through smart contracts and atomic settlements will “speed up transactions and automate sophisticated payment operations.”
Analysts note that only stablecoins and central bank digital currencies (CBDC) were previously viewed in this context, but deposit tokens have greater stability compared to them. Moreover, they’re fully subject to the regulatory rules applicable to commercial banks, which contributes to user trust.
As an example, the report cites Project Guardian, launched by the Monetary Authority of Singapore (MAS) with the participation of DBS Bank, SBI Digital Asset Holdings, and JPMorgan. Specifically, the project included the first transactions using the tokenized Singapore dollar (SGD) and Japanese yen (JPY).
According to analysts, as the technology evolves, deposit tokens could become “a natural bridge for the integration of CBDCs into the banking system.” Read about central bank digital currency trends in 2022 in a big piece by CP Media.
