One of the most important developments in the world of crypto over the past several years has been stablecoins, a variety of blockchain-enabled tokens that are tied to the price of fiat currencies such as the US dollar.
But a new study from JP Morgan’s blockchain unit Onyx says a potential institution-backed cryptocurrency called Deposit Tokens has the potential to become more popular than stable coins.
With the volatility of cryptocurrencies such as bitcoin and ether, traders often use stablecoins to hold their assets in stablecoins and make cross-border payments. The Deposit Token would cover these uses but with a blockchain-based coin that is fully integrated into the traditional banking system.
While the token is still a concept, the study states that they could be issued by banks and would represent commercial bank money, but in a digital form, which would expand its use.
According to the study, “the token form enables new functionality such as programmability and instant, atomic settlement to speed transactions and automate sophisticated payment functions.”
They will also rectify some of the failings associated with stablecoins, including the challenges that can come with dealing with the transaction congestion that drives institutional adoption.
Because the tokens will be equivalent to bank money, JPMorgan argues that they will have an edge over stable coins due to regulations already in place to support commercial bank deposits.
“We believe that deposit tokens will become a widely used form of money within the digital asset ecosystem, much like commercial bank money in the form of bank deposits is part of the circulating money today,” the bank wrote in the study. is over 90%.”
Deposit tokens could serve as a regulatory-approved alternative to stablecoins, which have come under scrutiny from regulators. In response to an order from the New York Department of Financial Services on Monday, New York-based crypto company Paxos said it will end its partnership with Binance and stop trading BSD, a stablecoin created in collaboration with the crypto exchange.
The stablecoin was once the third largest in the world by market cap.
wall street journal reported on Sunday that the Securities and Exchange Commission plans to sue Paxos because its BUSD stablecoin is allegedly an unregistered security. This enforcement could put at risk any US-based stablecoins like Circle’s USDC, which is second in market cap to USDT to Tether.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter that examines what leaders need to succeed. Sign up here.
Source: fortune.com
