JPMorgan Notes Global Shift Toward Tokenized Banking, Not Stablecoins

Regulators outside the United States, including the Bank of England, are increasingly favoring tokenized bank deposits over stablecoins, according to JPMorgan analysts.

Bank of England Governor Andrew Bailey supports banks offering tokenized deposits instead of issuing their stablecoins, a stance JPMorgan interprets as a growing international regulatory alignment. Tokenized deposits are traditional bank deposits recorded on blockchain networks, retaining protections like deposit insurance and capital requirements while gaining programmability and interoperability.

JPMorgan identifies two types: bearer (transferable, like stablecoins) and non-bearer (non-transferable, settled at par value between banks using central bank money). Non-bearer deposits are preferred by regulators because they help preserve the “singleness of money” and maintain financial system consistency, unlike stablecoins or bearer tokens, which can fluctuate in price due to credit concerns or market imbalances, as seen in past market disruptions.

Despite regulatory concerns, stablecoins remain popular for liquidity, though JPMorgan notes their reserves often stay within the banking system, similar to money market funds.

JPMorgan also questions the economic viability for banks to issue stablecoins under current regulations, citing proposals like the Bank of England’s suggestion that banks might need to back stablecoins with non-interest-earning central bank reserves.

While the U.S. is moving to authorize banks to issue stablecoins via the GENIUS Act, JPMorgan is piloting its own permissioned tokenized deposit coin, JPMD, on Base Layer 2.

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