While seven banks in the United Kingdom completed pilot sterling payments on the blockchain, an analysis published by CoinDesk suggests that such networks could reduce companies’ need to hold stablecoins.
Alongside the trials in the United Kingdom, the first live interbank payments were made in Germany in May. In the United States, The Clearing House is building a deposit network backed by 25 banks. These three initiatives are not yet connected to one another.
What changes when money in a bank account moves onto the blockchain?
A tokenized deposit is money in a bank account recorded on a blockchain. This allows banks to make payments automatically when predetermined conditions are met. Eligible deposits may earn interest and may be covered by deposit insurance within applicable limits. With reserve-backed stablecoins such as USDT and USDC, users instead rely on the issuer’s reserves and redemption terms.
JPMorgan’s JPM Coin, launched on the Base network, shows that bank money can be moved onto a public blockchain. However, the bank still decides who can use the token.
What advantages do stablecoins retain?
Stablecoins can be used today across different exchanges, wallets, and decentralized finance applications. People who cannot access a suitable dollar account can also hold dollar-pegged tokens in their own wallets.
According to the analysis on CoinDesk, if banks establish shared networks and offer similar payment convenience, companies that already have bank accounts may have less need to hold stablecoins separately to make payments. How far this competition extends will depend on whether bank networks are connected to one another and who can access them.
Not investment advice.