Unlocking the future of cross-border payments: tokenized deposits, stablecoins, and CBDCs

Tuesday 16 January 2024 11:54 CET | Editor: Mirela Ciobanu | Interview

Naveen Mallela, Managing Director at JP Morgan Chase, delves into the future of money and cross-border payments, stressing out the importance of tokenized deposits, stablecoins, and CBDCs.


Today we continue our series of articles on Money and Central Bank Digital Currencies (CBDCs). The series delves into the world of money, covering topics like fiat money, its challenges, central bank roles, and more. We wanted Naveen Mallela, Managing Director at JP Morgan Chase, to contribute to these themes as we were inspired by his panel discussion coordinated by OMFIF on the future of money: tokenized deposits, stablecoins, and CBDCs.


What is the difference between tokenized deposits, stablecoins, and CBDCs (in terms of their function, what they represent, who issues them, etc.)

We think of deposit tokens, stablecoins, and CBDCs broadly as different forms of digital assets. On a technology level, they are very similar. The key difference is the issuer – who issues the digital assets and whose liability does the digital asset represent? Why do I say they are very similar on a technology level? We see that many stablecoins today are issued on ERC-20 token standards. There have been trials where CBDCs are issued on ERC-20 standards. When J.P. Morgan did deposit token trials last year as part of Project Guardian with MAS, we also built to ERC-20 token standards.               

So, if you look across these different forms of digital assets, they can be built on the same technology, and to the same specifications and standards. And as such, functionalities are very similar – the ability to transact with each other round-the-clock and in near real-time, and the ability to use them with DeFi protocols such as liquidity pools and automated market making which was the subject of our trials last year. These are common across digital assets.

The key difference is the issuer: CBDCs are issued by central banks, deposit tokens by banks, and stablecoins by non-banks. The tokens are also subject to different levels of risk depending on the issuers, who are regulated and supervised to different degrees. 


What are the potentials and pitfalls of tokenized deposits, stablecoins, and central bank digital currencies?

When we think about digital assets, we can broadly categorise them as wholesale payments and retail payments. Wholesale payments are high-value transactions that are typically amongst financial institutions and valued in the millions of dollars per transaction, while retail payments are low-value transactions amongst retail users and businesses, and valued in the hundreds to thousands of dollars per transaction.

Though not a tokenized deposit, stablecoin, or CBDC, JPM Coin System, our payments product and service which uses a permissioned blockchain ledger to record account-based transactions, sees a daily transaction value of over USD 1 billion USD. We are able to bring the same benefits of round-the-clock near real-time transfers to our customers.

CBDCs have gone through years of experimentation, and some have eventually gone on to limited pilot trials. On the wholesale front, CBDCs solve an acute and specific need for wholesale payments. In fact, we welcome the announcement by the Monetary Authority of Singapore (MAS) that they will be piloting the use of wholesale CBDCs next year, and we are looking at how we can be involved in those efforts, particularly through Partior*.

Retail CBDCs seem to have gained traction only in a small number of countries. Stablecoins may be unlikely to transition to wholesale payments.


What learnings can be drawn from projects involving tokenized deposits, stablecoins, and central bank digital currencies?

We have participated in various digital currency and digital asset projects with central banks and the industry and have also done quite some internal work of our own at Onyx by J.P. Morgan. The one thing that is becoming clear, is that digital assets and digital currencies are real, and are the future.

A 2022 BIS survey showed that 93% of central banks surveyed are experimenting with some form of CBDCs. Projects are also advancing beyond experimentation to pilot trials.

The retail e-CNY pilot in China saw more than 360 million transactions, and 100 billion CNY in value, based on a report in October 2022. At such a scale, ‘pilot’ is really just a label. Digital assets and digital currencies are no longer at the sandbox stage, but live systems with real users and transacting in real value, and the space will only accelerate as we build out capabilities such as programmability, support a wider range of use-cases, and bring on even more users.


How can USD 100 be moved with just 1 dollar? What’s necessary to make that happen?

The costs associated with cross-border payments today are in large part due to the long payment chains, and the involvement of multiple intermediaries. Each additional intermediary adds to operational effort and processing time and incurs fees as part of the processing.

Flattening the ledgers, shortening the payment chains, and reducing the number of intermediaries is one approach we are taking to make cross-border payments faster and cheaper. With Partior, participant banks are able to transact directly with each other in different currencies, shortening the time taken for transactions, while also reducing the costs of doing so.


How should cross-border payments be managed in the face of varying regulatory frameworks across jurisdictions?

Regulatory requirements, particularly differences in policies and regulatory frameworks across jurisdictions, can be a challenge for cross-border payments, as they increase processes across the payment chain.

While there are efforts to explore how regulations can be harmonised, it may be some time before we see results. Another approach, that is being undertaken by the BIS Innovation Hub Singapore Centre through Project Mandala, is exploring the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a common protocol for cross-border use cases. We see value in such projects and actively contribute to such industry efforts.


How can we prevent the creation of walled gardens – centralized payment systems/infrastructure?

We see the value of open participation. I appreciate the openness of public blockchains and how they support a wide variety of use cases, including the way that smart contracts on public blockchains are able to interact with each other seamlessly. There is a lot that we can learn from them, and we can apply learnings to financial industry use cases.

Banks have a responsibility to implement reasonable and appropriate controls to ensure the safety, integrity, and soundness of financial transactions. So, we have to put up walls to screen out and stop bad actors. However, it doesn’t mean that we want to end up with a walled garden of a single bank. Rather, our broader intention is to build and participate in a trusted ecosystem of banks and the broader financial industry, as a large network, brings value to us and our clients. As an example, the largest financial institutions network today, SWIFT, connects over 11,000 banking institutions in over 200 countries. It is ‘walled’, but I don’t think anyone will call it just a ‘garden’.  In this regard, we are participating in a recently launched initiative called Global Layer One or GL1. The initiative explores the development of a shared ledger platform that is open and accessible for regulated financial institutions to develop, deploy and use applications for financial industry use cases. We see potential use cases in payments, asset tokenization, DvP settlement, trade, and trade finance.

Besides JP Morgan, BNY Mellon, DBS, MUFG, and MAS are amongst the initial members, and we expect participation to grow further. This is one example of how we are building towards a vision of an inclusive financial ecosystem.


* Partior was established in 2021 as a joint venture between J.P. Morgan, DBS Bank, and Temasek, with Standard Chartered joining in 2022. Partior brings multiple institutions on a common network to enable seamless interaction with a common set of protocols, allowing for cross-border payments and foreign currency exchanges to be performed much more efficiently.


About Naveen Mallela

Naveen Mallela is the global head of the Coin Systems team at Onyx by J.P. Morgan, which focuses on building innovative payment products and infrastructure based on digital currencies and blockchain technology. Most recently Naveen led the pilot launch of Deposit Tokens for J.P. Morgan as part of Project Guardian – a flagship industry initiative anchored by the Monetary Authority of Singapore (MAS). He was previously the chief designer and product lead for JPM Coin, which is a cornerstone product offering of Coin Systems. Prior to his current role, Naveen was the Digital Payments lead for JPMorgan’s Corporate and Investment Bank in the Asia Pacific region and as part of his role he spearheaded the co-founding of Partior, a Singapore-based technology company.


About J.P. Morgan

JPMorgan Chase & Co. (NYSE: JPM) is a leading financial services firm based in the United States of America (US), with operations worldwide. JPMorgan Chase had USD 3.9 trillion in assets and USD 317 billion in stockholders’ equity as of September 30, 2023. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the US, and many of the world’s most prominent corporate, institutional, and government clients globally. Information about JPMorgan Chase & Co. is available at

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Keywords: stablecoin, CBDC, cross-border payments, instant settlement, B2B payments, DeFi
Categories: Banking & Fintech
Countries: World
This article is part of category

Banking & Fintech