In Brief
- JPMorgan and DBS are collaborating on a blockchain-based tokenization framework for interbank payments.
- This initiative aims to enable instant, 24/7 cross-border transactions across multiple blockchain networks.
- The framework addresses the growing institutional interest in tokenized assets and real-world assets (RWAs).
- Leading Swiss banks are also actively exploring similar blockchain-based payment solutions.
- Industry experts highlight interoperability as key to reducing fragmentation in tokenized finance.
Financial Giants Explore Blockchain for Payments
Leading financial institutions are increasingly investigating blockchain technology to enable more cost-effective and rapid institutional payments, indicating a rising trend in tokenization solutions.
US investment bank JPMorgan and Singaporean multinational banking group DBS recently announced their development of a blockchain-based tokenization framework. This framework is designed to facilitate on-chain transfers between their respective tokenized deposit ecosystems, with the goal of establishing a new industry benchmark for digital payments between banks.
The proposed tokenization framework will empower both financial institutions to process instant payments around the clock. It is built to operate across both public and permissioned blockchain networks, offering their institutional clients enhanced access to cross-bank on-chain transactions.
According to DBS, this new framework will allow institutional clients of both banks to exchange or redeem tokenized deposits and conduct real-time cross-border payments. The system is engineered for 24/7 operation, providing what DBS refers to as round-the-clock availability.
Banks Drive Interoperability in Tokenized Finance
A significant portion of the commercial banking sector is actively engaged with tokenized deposits. A 2024 survey by the Bank for International Settlements (BIS) revealed that at least one-third of surveyed commercial banks have either launched, piloted, or researched tokenized deposits.
This development aligns with a broader trend of growing institutional interest in tokenized financial solutions, which are an integral part of the expanding tokenized real-world assets (RWA) sector. The aim is to bring financial and tangible assets onto the blockchain to improve investor accessibility and efficiency.
In parallel, major Swiss banks including UBS, PostFinance, and Sygnum Bank are also investigating blockchain-based interbank payment systems. These institutions successfully completed the first legally binding, blockchain-based payment on September 16, demonstrating the technology’s utility for bank deposits and institutional transactions.
Rachel Chew, Group Chief Operating Officer and Head of Digital Currencies, Global Transaction Services at DBS Bank, emphasized the importance of an interoperable framework. She stated that developing such a framework is crucial for mitigating fragmentation in tokenized, cross-border money transfers.
Chew further commented, Our collaboration with Kinexys by J.P. Morgan to develop an interoperability framework is therefore a significant milestone for cross-border money movement. She added that instant, 24/7 payment capabilities will provide businesses with greater optionality, agility, and speed to navigate global uncertainties and capture emerging opportunities.
The announcement of this new framework follows closely behind JPMorgan’s initiation of the first transaction on its forthcoming tokenization platform, Kinexys Fund Flow. This platform is slated for launch in 2026, with plans to tokenize additional assets such as private credit and real estate.
JPMorgan and DBS were also key financial backers of Partior, a blockchain-based settlement network and payment platform that successfully raised $60 million in July 2024.
Expert Summary
Leading financial institutions, including JPMorgan and DBS, are advancing blockchain technology for more efficient institutional payments via tokenized deposits. Their joint development of an interoperability framework aims to set new standards for swift, 24/7 cross-border transactions across diverse blockchain networks.
This initiative reflects a broader industry trend toward blockchain adoption for tokenizing real-world assets, with other major banks also exploring similar solutions. The focus on interoperability is seen as vital for streamlining global payments and enhancing financial accessibility.
