JPMorgan says regulators outside US appear to prefer tokenized bank deposits over stablecoins
Regulators outside the United States — including the Bank of England — appear to favor tokenized bank deposits over stablecoins as the two models compete for future relevance in digital finance, according to JPMorgan analysts.Citing recent comments by Bank of England Governor Andrew Bailey, who said he would prefer banks offer tokenized deposits rather than issue their own stablecoins, JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said this may signal a broader regulatory preference abroad.Tokenized deposits refer to commercial bank deposits recorded on blockchain infrastructure. They retain the protections and backing of traditional deposits — such as deposit insurance, capital requirements, lender of last resort support, and compliance with AML/KYC rules — while gaining programmability and blockchain interoperability, the analysts noted.Tokenized deposits can take two forms: bearer (transferable, like stablecoins) and non-bearer (non-transferable, settled between banks at par). It’s the non-bearer version that regulators are more likely to support, the analysts said, because it helps preserve the "singleness of money" — a core principle of financial systems that ensures different forms of money are interchangeable at face value.Bearer-style tokenized deposits and stablecoins, on the other hand, can drift from their peg due to market factors like credit risk or liquidity imbalances, the analysts said. This was evident during past crises involving Terra, FTX, and Silicon Valley Bank, they noted.“As argued in Garratt and Shin (2023), ‘Stablecoins versus tokenized deposits: implications for the singleness of money’, transferable bearer tokenized deposits would be traded as stablecoins or other digital assets and therefore their price can fluctuate away from par for various reasons such as the perceived credit risk of the issuing entity or supply and demand imbalances in the digital/crypto ecosystem,” the analysts said.“Instead, in the case of non-bearer non-transferable tokenized deposits, the payment from a customer of one bank will be credited to the account of another person at another bank at face value, using central bank money for settlement, thus ensuring singleness of money,” they said.Despite the likely regulatory preference, the analysts acknowledge that stablecoins continue to dominate in crypto markets due to their liquidity and ease of transfer — advantages that non-bearer tokenized deposits currently lack. The analysts further said money doesn’t leave the banking system when it moves into stablecoins. Like money market funds, stablecoin reserves are usually recycled into assets like Treasury bills and continues circulating within the system.The analysts also question whether it makes economic sense for commercial banks to issue their own stablecoins under certain regulatory proposals. For example, a 2023 Bank of England paper suggests banks may be required to hold reserves at the central bank to back stablecoins — without earning interest on those reserves. The analysts argue this would make stablecoin issuance unattractive for banks, as it would reduce their ability to generate yield from customer deposits.In the U.S., on the other hand, President Donald Trump is expected to sign the GENIUS Act, a landmark stablecoin bill that would allow banks to issue stablecoins and promote their use for payments.Notably, JPMorgan is piloting a permissioned tokenized bank deposit coin, called JPMD, on the Base Layer 2. The bank filed a trademark application for JPMD in June, citing multiple potential use cases.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.