Don't love stablecoins? JPMorgan: Analyzing the reasons behind Europe's and Singapore's regulators' preference for "tokenization of deposits".

Are stablecoins less favorable than tokenized deposits? A recent report from JPMorgan shows that regulatory authorities in major economies such as the UK, Europe, and Singapore are shifting their focus from stablecoins to "tokenized bank deposits." (Background: Milestone! The U.S. passes three cryptocurrency bills: GENIUS stablecoin, Clarity regulation, anti-CBDC bill sent to Trump for signing) (Context: The Bank of England warns that stablecoins are toxic, emphasizing a return to central bank-backed tokenized deposits) Stablecoins are generally seen as the best bridge connecting TradFi and Blockchain, but according to JPMorgan's latest report, regulatory authorities in major economies such as the UK, Europe, and Singapore are moving their attention from stablecoins to "tokenized bank deposits." Why the preference for tokenized deposits? Last year, Andrew Bailey, the Governor of the Bank of England, publicly expressed a desire for the financial system to use deposits that can circulate on the Blockchain, rather than banks issuing their own stablecoins. Bailey emphasized: "If we had a currency system based on central bank money, it would be much better." JPMorgan analysts cited research by Garratt and Shin, indicating that unregistered tokenized deposits can be settled at face value between banks while maintaining stability with a one-to-one exchange with physical fiat, aligning with the principle of monetary unity. For regulators, this design retains the familiar deposit guarantee framework of banks and reduces systemic risk. Compared to stablecoin issuers that may be located overseas with varying degrees of reserve transparency, tokenized bank deposits are directly linked to commercial bank liabilities and can access existing payment regulatory networks. Thus, regulators do not need to worry about classifying new forms of currency and can ensure smooth integration of systems for bankruptcy settlement, customer compensation, and more, making them more willing to approve. The aura and concerns of stablecoins However, it is worth noting that stablecoins remain the liquidity engine of the crypto market. USDT and USDC see daily trading volumes soaring into the tens of billions of dollars, with transfers completed in seconds and low costs. However, a series of events have also exposed their potential risks: the collapse of Terra in 2022 triggered a chain liquidation; the same year, FTX's bankruptcy froze huge amounts of user funds; in 2023, Silicon Valley Bank faced a liquidity crisis, causing USDC to depeg by over 10%. These shocks remind regulators that despite stablecoins touting "stability," they depend on the asset management of operating parties and market confidence, making risks difficult to ignore. On the other hand, banks have little incentive to issue their own stablecoins. For example, under the Bank of England's draft, if banks are required to store 100% of reserves with the central bank without interest, it would undermine interest margin income. In contrast, offering tokenized deposits maintains the scale of the balance sheet while enhancing settlement efficiency through on-chain technology, aligning better with commercial motives. JPMorgan's dual-track strategy In the face of different regulatory directions, JPMorgan has adopted a "two-pronged strategy." On one hand, the bank is testing a permissioned tokenized deposit currency, JPMD, on the Base chain and has already submitted a trademark application. The goal is to complete interbank settlements between institutions in seconds while retaining deposit insurance and KYC processes. On the other hand, JPMorgan continues to participate in stablecoin discussions and industry alliances, assessing scenarios for cross-border payments and capital market tokenization. Related reports: U.S. House crypto week: "Clarity" regulatory clarity bill debuts Wednesday, followed closely by "GENIUS" stablecoin on Thursday a16z report: Liquidity, sovereignty, and credit challenges behind the rise of stablecoins Arthur Hayes' "The Price Relationship of Stablecoins" full text: Stop buying Circle stocks, go long on Bitcoin <Not fond of stablecoins? JPMorgan: Reasons why European and Singapore regulators prefer "tokenized deposits"> This article was first published in BlockTempo, the most influential Blockchain news media.