New blockchain solutions include corporate treasury and retail banking, and open the transaction system to multiple depositors with tokens and stablecoins. But regulators worry that these innovations could make the global system more fragile.
Tuesday, 2:14 PM GMT: Elena, the treasurer of a global property giant in Rotterdam, stares at the red warning on her dashboard. A supplier in Singapore wants an immediate payment of $40 million to free shipments of semiconductors. The old banking system would tell him that he was out of luck; his euro is locked in the T+1 settlement cycle and foreign exchange markets are too slow to be released quickly.
But Elena’s wealth activities are kinetic. Press “Execute”.
Four thousand miles away in Chicago, it’s 8:14 AM: David, a retail bank customer, buys a coffee. His phone rings with a silent notification: “Yield Done: $4.20.”
He can’t, but 18 seconds ago, JP Morgan’s Kinexys algorithm borrowed the digital title of his branded vacation home, which was sitting idle in his portfolio, and pledged it as collateral to raise $40 million in Elena’s intraday stablecoins.
In less than a minute, the job is done.
Elena’s chips are released in Singapore.
The bank was able to manage its risk without affecting its balance sheet.
And David paid for his morning coffee just by having a house.
Two-tier digital asset strategies, comprising Tier 1 institutional-led/bank-owned and Tier 2 retail/public chain to integrate corporate treasury and retail banking, are now a reality. Organized finance seems inevitable; the struggle is over who—the banks or the crypto-natives—will dominate this new “kinetic” world that links retail assets with corporate liquidity.
“Our mission at Kinexys for JP Morgan is to transform the way information, money, and assets move around the world from an institutional perspective,” said Arif Khan, chief product officer of Kinexys Digital Payments. “Since its launch, over US$3 trillion in transaction volume has been processed on the Kinexys platform, which averages over US$5 billion daily in transaction volume.” Although Kinexys’ offerings are not intended for retail customers, they enable banks to use retail assets as collateral for institutional customers.
Tony McLaughlin, who contributed to “The Regulated Liability Network,” the bank’s 2022 white paper and digital currency plan, left Citi last year after a decade-long career to found Ubyx, a stablecoin clearinghouse. He sees the November 2024 US election as paving the way for banks to connect with public chains.
“This is because the regulation of stablecoins could be bypassed, and stablecoins live on public chains,” he said. “It would be unbearable if only non-banks were able to offer stablecoins on public chains, so banks would have to be able to enter the market.”
McLaughlin predicts the development of a “multiple market structure, as it is [credit] cards,” with “multiple issuers and multiple acceptors” and a variety of issuers—including banks and non-banks—offering token deposits and a variety of stablecoins. Corporate treasurers will use a combination of tokenized deposits, stablecoins, and tokenized money market funds from different issuers.
Ubyx is working to get banks and fintechs to offer wallets for customers to receive stablecoins and token deposits, ensuring that transactions are “processed within a regulatory framework and pass KYC, AML, fraud, and sanctions checks,” McLaughlin said. The current situation, where “stablecoins are sold in every wallet you store,” is not so desirable, he says, since the supply of these unregulated wallets is “unlimited” while the supply of regulated wallets is “zero”.
McLaughlin blames regulators for “putting a big ‘Keep Off the Grass’ sign on bank participation in public blockchain,” allowing the “vacuum” to be “filled by unregulated players.” The involvement of banking and fintech will make these new transaction processes safer, he says, and “dramatically expand the controlled areas of these networks.” He draws parallels with the evolution of broadcast media; just as content piracy opened the way for TV and music streaming to “respectable players,” so the transition to a reliable and trustworthy system of digital transactions will take place on public blockchains.
“We believe that both private and public blockchain options will converge going forward,” Khan said. “Institutional companies that want to store their money on a private permissioned network will still benefit from the 24/7, 365-day scheduling benefits that blockchain infrastructure provides.”
The Interoperability Imperative
While banks are positioning kinetic treasury as a way to improve liquidity, regulators and wealth strategists warn that it could introduce new weaknesses in the global commercial system. Without a public digital currency, Fabio Panetta, the governor of the Bank of Italy, warned, the payment market will be dominated by “closed” private solutions, such as proprietary stablecoins or Big Tech platforms, which do not interact, divide the financial system and threaten the “unmarriage” of funds.
JP Morgan’s Khan reckons that the synergy between deposit tokens and other digital currencies will be important in terms of scale and efficiency.
“We are continuously working with other players in the industry, such as DBS in Singapore, to develop a framework for interbank token deposit transfers on multiple blockchains,” he said. “This may allow individual bank client institutions to pay each other, exchange or redeem their deposit tokens on any banking platform and across borders with real-time, round-the-clock availability.”
For example, a JP Morgan institutional client will be able to pay a DBS institutional client using JPM Coin on the Base public blockchain, which the recipient can exchange or redeem for an equivalent amount through DBS Token Services.
“This is intended to support the unity of money,” argued Khan, “where deposit tokens across banks and blockchains are verifiable and represent the same value: an important principle in an increasingly multi-chain, multi-issue world.”
The Clearing House, which owns and operates the main payment system infrastructure in the US, is currently discussing and analyzing stablecoins and token deposits. President and CEO David Watson suggests that token deposits could be a more important development than stablecoins, especially for large multinational companies and large banks.
That’s because token deposits are considered “really a fiat instrument,” he says, while a stablecoin merely “represents an instrument.” This directly affects the risk profile of corporate treasuries. “If you’re an international corporate treasurer,” Watson asked, “how much of the company’s balance sheet are you willing to hold in different stablecoins, with all that exposure, versus government-backed fiat currency?”
The concerns about trust and risk highlighted by Watson directly inform programs like JPM Coin, which Khan noted were driven by customers who wanted to make public blockchain payments using a trusted, mainstream banking product. With Kinexys Digital Payments, cash managers can pre-define rules that automatically trigger payments, foreign currency conversions, and liquidity movements in real time. Decisions are made without manual intervention and are not subject to bank closing times.
The BMW Group uses Kinexys Scheduled Payments for fully scheduled FX purchases of euro-to-US dollars and corresponding fund movements. Since both FX and settlement transactions happen instantly on the same blockchain, the process works 24/7 without human intervention or traditional settlement windows. This allows BMW to improve global liquidity, reduce non-performing balances, and make near-term, cross-border payments.
The traditional way for large multinationals to manage cash flow—relying on multiple bookkeeping and manual cash transfers—is inherently inefficient and complex, Khan continued. Blockchain-based infrastructure, in contrast, offers a fundamental change, creating a new, more powerful model that goes beyond the limitations of traditional residential windows.
“We’re going to see a new paradigm emerge,” McLaughlin predicted. “We will move from the age of bank accounts to the age of tokens, chains and wallets.”
