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Well here we have it, it is not just Citibank that is converting client deposits into digital tokens. According to this Bloomberg article, similar activities are going on at JP Morgan as well. So according to Bloomberg, JP Morgan has already piloted issuing deposit tokens in a single transaction last year as a part of the Monetary Authority of Singapore’s Project Guardian and highlighted the potential of this form of money in a recent study. There are also further details given explaining that JP Morgan has already developed several applications using blockchain. The bank runs a system called J P M Coin, which was announced in 2019 and allows some JPMorgan corporate clients to move dollars and euros from their various accounts within the financial institution. The bank said in June that it had used the system to process about 300 billion dollars of transactions since its launch. But the deposit token, the Bank is working on now, would function differently from the previously developed J P M Coin, as it could be used to easily send money to clients of another bank as well. So this is not only for transactions between clients of the Bank but across other Banks as well. Most likely utilizing the newly rolled out Fed Now electronic payment system. The article further highlights that this new infrastructure not only allows instant money transfers, but the system would also be connected with the bank’s existing compliance systems so that transactions can go through know your customer, anti-fraud and other necessary checks and be part of the company’s regulatory reporting in real time. Which means that suspicious transactions can also be identified and stopped automatically and in real time. Lastly they state that JP Morgan may launch the product for use by corporate clients in less than one year after it receives a go-ahead, the person said. So this infrastructure is already very advanced and rolled out so that not much is required to pull the trigger. Now what is the problem with this technology? Isn´t it wonderful to have instantaneous payments? Yes sure that is a valid benefit. What concerns me though are the details and the tine print terms of this new tokenized money. Regulations and laws have already eroded the ownership structure of your Money in the Bank from they hold your money safe on your behalf to whatever you put into your own bank account is strictly speaking no longer your money, it becomes the money of the bank and you just become a creditor of the bank for that amount. Most people don’t really understand this and it does not become a visible problem to you unless you try to withdraw a larger amount of money or your bank gets into solvency issues. But who knows what other little things could be written into the contract for these new tokens. The Bank may refuse to exchange them back to US Dollars or it may but restrictions on its use, or it may restrict you for whatever reason. Because you no longer hold US Dollars, you just own some artificial product for which its value is given by the Bank. Like FTX tokens. One day such value can drop for whatever reason. So there are some risks to this. Secondly due to the Blockchain, every transaction with such tokens will be stored forever in the Blockchain and if this system is able to transact with other banks, then they cant use their own system. There must be some overall system, like the Fed Now system because otherwise the individual bank systems would not be able to transact with one another. And as a result, every accountholder would have to have an overreaching digital ID which is stored together in the Blockchain with all the transaction data. So whoever would want to use such data for whatever purpose could access that centrally and would no longer have to reach out to individual banks to get extracts from their internal systems. This opens the door for limitless surveillance and no privacy at all.
