tl;dr
Financial regulators outside the U.S. increasingly favor tokenized bank deposits over stablecoins, preferring digital instruments issued by commercial banks integrated within the existing financial system. Tokenized deposits use blockchain while maintaining traditional safeguards like central bank l...
Financial regulators outside the United States are increasingly favoring tokenized bank deposits over stablecoins, signaling a shift in how traditional finance integrates digital technology without sacrificing regulatory safeguards. According to research led by JPMorgan’s Nikolaos Panigirtzoglou, central banks and regulators such as the Bank of England prefer digital instruments issued by commercial banks that remain woven into the existing financial system.
These tokenized deposits leverage blockchain infrastructure while preserving key protections of traditional deposits, including access to central bank liquidity, capital buffers, and compliance with anti-money laundering regulations. The form gaining the most regulatory support is the non-transferable, or non-bearer, deposit type, which settles between accounts at full face value. This design reduces risks of price deviation and maintains the “singleness of money,” ensuring uniformity across money forms.
In contrast, stablecoins and transferable digital deposits are more prone to market value fluctuations, driven by credit risks or liquidity mismatches. Previous market failures have increased concerns about the volatility of privately issued digital currencies. Although stablecoins remain popular in crypto markets due to ease of transfer and liquidity, JPMorgan notes that these assets often retain backing within traditional banking systems through investments in short-term government debt, meaning they do not fully escape regulated financial frameworks.
Regulatory approaches vary across regions. In the UK, regulators express skepticism about commercial banks issuing stablecoins, especially if frameworks require holding non-yielding central bank reserves, which may deter banks from stablecoin issuance. By contrast, U.S. policymakers seem more receptive; the anticipated GENIUS Act would permit banks to issue stablecoins directly, encouraging their use for domestic payments and signaling more openness to stablecoin integration.
JPMorgan itself is actively exploring tokenized finance with JPMD, a permissioned deposit coin undergoing pilot testing on the Base platform. The bank is also experimenting with stablecoins confidentially and has filed a trademark for its deposit token product, indicating potential use cases such as settlement, programmable finance, and interbank transfers.