DBS and J.P. Morgan’s Kinexys develop interoperability framework for tokenized deposits

Today, Singapore’s DBS Bank and Kinexys, a J.P. Morgan company, have collaborated to create an interoperability framework that facilitates tokenized value transfers between their respective on-chain ecosystems.  

According to the press release, the framework seeks to establish a new industry standard for the real-time, international settlement of tokenized deposits in both public and permissioned blockchains.

The framework, which is still under development, will enable transactions between clients of Kinexys Digital Payments and DBS Token Services on both public and permissioned blockchain networks. According to the framework, on the public base blockchain, a JP Morgan institutional client would use JP Morgan Deposit Tokens (JPMD) to pay a DBS client.

Additionally, after receiving the JPMD tokens, the DBS client would have the option to convert them into DBS tokens or redeem them for fiat money. According to DBS, the goal is to build a framework that others can use. 

Notably, the framework is designed to work across different blockchain environments.

DBS and Kinexys unite to boost interoperability framework

Rachel Chew, Group Chief Operating Officer and Head of Digital Currencies, Global Transaction Services, DBS Bank, said that businesses can navigate global risks and seize new opportunities with the optionality, agility, and speed that instant 24/7 payments offer.

Chew claimed that interoperability is still essential to minimizing fragmentation. She added that interoperability guarantees the safe cross-border transfer of the full value as the digital asset ecosystem expands.

Naveen Mallela, global co-head of Kinexys, stated that collaborating with DBS on the project is a clear example of how financial institutions can work together to secure the uniqueness of money and ensure market interoperability.

According to Mallela, the partnership also enhances the benefits of tokenized deposits for institutional clients.

The project coincides with the tokenized finance industry’s rapid expansion. According to a 2024 Bank for International Settlements poll, tokenized deposits have been introduced, tested, or studied by commercial banks in almost one-third of the jurisdictions assessed.

DBS confirmed that, through the partnership on a cross-issuer, cross-network interoperability architecture, DBS and Kinexys are dedicated to improving the accessibility and scalability of tokenized deposits. 

The Singapore bank emphasized that the collaboration will revolutionize the way multinational corporations handle their funds while guaranteeing strict regulatory compliance.

Kinexys advances interoperability with JPM deposit token

The framework builds upon JP Morgan’s previous research on interoperability standards for bank tokens on open blockchains. 

In May, the Institute of Technology’s Digital Currency Initiative (MIT DCI) announced a collaboration with JPMorgan. According to MIT DIC, the partnership involved the investigation and creation of a payment token prototype on an EVM-based blockchain.

In the MIT DIC and JPMorgan report, the prototype included features that allowed customers to carry out transactions and permitted the issuing bank to implement payment control processes. 

The prototype also included administrative tasks that the bank can perform.

MIT DIC and JPMorgan recommended using the current ETH standards for the most part. The MIT DIC and JPMorgan also suggested two additional ones that they thought were necessary for interbank transactions. Additionally, the MIT DIC recommended loosening rules about blockchain-based bank payments in certain places.

On June 24, Kinexys announced a proof-of-concept (PoC) for the USD J.P. Morgan Deposit Token (JPMD) on the public blockchain. The PoC is a substitute for stablecoins in native cash settlement and payment use cases for J.P. Morgan’s Institutional clients.

For the pilot, JPMD was issued on BaseScan, an Ethereum Layer 2 blockchain network integrated into Coinbase.

According to the announcement, the JPMD pilot is an extension of Kinexys’ efforts to develop digital currency solutions. The development started with Kinexys Digital Payments Blockchain Deposit Accounts on private permissioned blockchain infrastructure in 2019. 

According to Kinexy, JPMD represents the first product offered by J.P. Morgan, which will provide institutional clients with a digital currency substitute for stablecoins on public blockchain infrastructure.

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