According to the lender, regulators see tokenized bank deposits as a safer digital currency alternative to stablecoins amid crypto volatility concerns.
JPMorgan’s latest research indicates that international regulators are more inclined to support tokenized deposits, particularly those that preserve the existing structure and stability of fiat-based banking systems, The Block reported on July 18.
According to the Wall Street lender, financial regulators outside the United States are showing a growing preference for tokenized bank deposits over stablecoins.
The trend highlights a shift in how traditional finance seeks to adapt digital technologies without compromising core regulatory and systemic safeguards.
The research, which was led by JPMorgan’s Nikolaos Panigirtzoglou, highlights how central banks and regulators, including the Bank of England, are leaning toward digital instruments issued by commercial banks that remain fully integrated within the existing financial system.
Tokenized deposits use blockchain technology but keep the key protections of regular bank deposits. These protections include being able to access money from the central bank, holding enough reserves, and following rules against money laundering. They were designed to be both new and compliant with regulations.
Stability and Control Under Scrutiny
The non-transferable kind of tokenized deposits, also known as non-bearer deposits, which settle between accounts at full face value, attracts the most regulatory support.
These instruments minimize the risk of price deviation and the uniformity across forms of money, a concept often referred to as the “singleness of money.”
Unlike regular bank deposits, stablecoins and similar digital deposits often see their value change. These changes are due to credit risks or issues with how easily they can be bought or sold. Past problems in the market have also clearly shown worries about how unstable private digital currencies can be.
Stablecoins are still more common in crypto because they’re easy to move and widely available. However, JPMorgan’s report pointed out that these assets usually stay backed by the traditional banking system, often by investing in things like short-term government bonds.
As such, they do not represent a true exit from the regulated financial framework.
Differing Trajectories
In regions like the UK, regulators have questioned the viability of allowing commercial banks to issue stablecoins, especially under frameworks that might require them to hold central bank reserves without generating yield.
JPMorgan’s analysis suggested that such conditions would reduce incentives for banks to issue their own stablecoins.
Meanwhile, U.S. policymakers are taking a different stance. The expected passage of the GENIUS Act, a legislative effort led by President Donald Trump, would allow banks to issue stablecoins directly and promote their use in domestic payments.
This signals a more open approach to integrating stablecoins within the broader financial ecosystem.
JPMorgan itself explores tokenized solutions through JPMD, a permissioned deposit coin it currently pilots on Base. The lender is also testing the waters with stablecoins behind closed doors.
The bank filed a trademark for the deposit token product in June, pointing to potential applications in settlement, programmable finance, and cross-bank transfers.
