JPMorgan Chase JPM is further expanding its exposure to cryptocurrencies and the digital asset space. The biggest bank in the United States (by assets) can soon launch a blockchain-based deposit token for customers, provided it receives regulatory approval.
Per a Bloomberg report, JPM is in the early stages of exploring the concept. However, most infrastructure to run the token is already in place. Thus, after it is approved, JPM might launch it in less than a year.
A spokesperson for JPMorgan said, “Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly.”
A deposit token is like a digital version of someone’s deposits in a bank. Deposit tokens are issued on a blockchain by a depository institution to represent the deposit position. Thus, deposit tokens are different from stablecoins because stablecoins are issued by a non-banking private entity.
The deposit token is expected to be first launched for corporate clients, allowing for instant payment settlements and economic transactions.
Notably, until July 2020, the Office of the Comptroller of the Currency did not grant permission to banks in the United States to hold cryptocurrencies. The amendment post-July gave banks the go-ahead to begin exploring cryptocurrency operations.
While JPM’s CEO, Jamie Dimon, has shown his disinterest in cryptos, the bank has been among the leaders in experimenting with blockchain and metaverse technology.
In July 2021, JPM became the first major bank in the United States to allow its financial advisors to give all its wealth-management clients access to cryptocurrency funds. JPMorgan has also been offering its Private Bank wealth management customers access to an in-house passively managed Bitcoin fund.
The Wall Street giant launched a division focused on digital assets named Onyx and its own digital currency, JPM Coin.
JPM Coin was launched in 2019 to allow corporate clients to move euros and dollars internally.
Now, the new deposit token, if launched, will be different from JPM Coin because it would allow customers to transfer funds between banks and for the settlement of tokenized securities.
Over the past six months, shares of JPM have gained 9.6% compared with the industry’s growth of 2.1%.
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Currently, JPMorgan sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Increased Competition in the Digital Asset Space
A few years ago, banks were not that interested in the crypto and digital asset space. But after witnessing increased demand for the emerging market, banks and financial institutions are embracing cryptocurrencies.
Recently, Robinhood Markets, Inc. HOOD added wallet support for Bitcoin and Dogecoin.
Earlier, the Robinhood wallet — a multi-chain, self-custody and Web3 wallet — was restricted to sending and receiving tokens built only on the Ethereum blockchain. However, as customers asked for more assets on more chains, Robinhood decided to expand its product offerings.
The company said that now all users of Robinhood wallet can send and receive Bitcoin and Dogecoin. Additionally, HOOD has begun rolling out swap features for selected users that allow them to trade Ethereum for more than 200 different assets.
In August 2022, BlackRock, Inc. BLK partnered with cryptocurrency exchange Coinbase Global to provide its institutional clients access to digital currencies.
Through the partnership, BLK’s institutional clients have access to crypto trading, custody, prime brokerage and reporting via Coinbase Prime, which is the exchange’s institutional platform, providing a wide range of features and tools.
Also, BLK launched a spot Bitcoin private trust for institutional clients in the United States. The fund seeks to track the performance of Bitcoin, less expenses and liabilities of the trust.
However, in July 2023, the U.S. Securities and Exchange Commission said that the application filed by BLK for a spot Bitcoin exchange-traded fund was inadequate. Reportedly, the filing did not have enough detail with respect to the “surveillance-sharing agreements.”
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