Major financial institutions continue to explore blockchain technology to make institutional payments cheaper and faster, showing increased interest in tokenization solutions.
US investment bank JP Morgan and Singaporean multinational banking group DBS announced on Tuesday that they are developing a blockchain-based tokenization framework that will enable on-chain transfers between their deposit token ecosystems. This initiative aims to establish a new industry standard for interbank digital payments.
With the tokenization framework, the two financial institutions will facilitate 24-hour instant payments on both public and permissioned blockchain networks, giving institutional customers broad access to cross-bank on-chain transactions.
According to DBS, the new framework will enable institutional customers of both banks to exchange or redeem tokenized deposits and make real-time cross-border payments on both public and permissioned blockchain networks. The system is designed to operate 24 hours a day, seven days a week, providing what DBS calls “24-hour availability.”
The new interoperability framework comes at a time of increased institutional interest in tokenized financial solutions, which are part of the broader tokenized real-world assets (RWA) sector, and are aimed at bringing financial and tangible assets onto blockchains to increase access for investors.
According to a 2024 study by the Bank for International Settlements (BIS), at least one-third of commercial banks surveyed are implementing, piloting, or researching tokenized deposits.
Banks promote tokenized financial interoperability
Some of Switzerland’s largest banks, including UBS, PostFinance and Sygnum Bank, are also considering blockchain-based interbank payments.
On September 16, these institutions completed the first blockchain-based legally binding payment, proving the effectiveness of this technology in bank deposits and institutional payments.
Related: Standard Chartered’s venture arm raises $250 million for crypto fund: report
According to Rachel Chu, group chief operating officer and head of digital currency global transaction services at DBS Bank, building interoperable frameworks remains important to reduce fragmentation in tokenized cross-border payments.
“Our collaboration with JPMorgan’s Kinexys in developing an interoperability framework therefore marks an important milestone for cross-border capital flows,” said Chu, adding that 24/7 instant payments will give businesses greater “selectivity, agility and speed to navigate global uncertainties and seize new opportunities.”
Related: Standard Chartered expects $2 trillion in tokenized RWA by 2028, comparable to stablecoins
The new framework was announced two weeks after JPMorgan launched the first trades on its upcoming tokenization platform, Kinexys Fund Flow, Cointelegraph reported on October 30th.
The investment bank is preparing to launch a tokenization platform in 2026, with plans to tokenize additional assets such as private credit and real estate.
JP Morgan and DBS are also some of the key backers of Patrior, a blockchain-based payment network and payment platform, which raised $60 million in July 2024.
magazine: Cryptocurrencies wanted to topple banks, now they are becoming banks in the fight against stablecoins