JP Morgan, MIT Propose Standards for Interoperable Bank Tokens

JP Morgan‘s blockchain division, JPMorgan.com/kinexys/index”>Kinexys, and the Massachusetts Institute of Technology’s Digital Currency Initiative (MIT DCI) recently released a joint paper outlining their vision for establishing interoperability standards for bank tokens on open blockchains. Their collaboration mainly focuses on aligning with existing Ethereum standards, while recommending two new standards tailored for interbank payments.

The organizations base their recommendations on lessons learned from permissionless blockchains and certain permissioned blockchain systems like Unified Ledgers and Singapore’s Global Layer One. According to the paper, typical solutions for tokenized bank payments—such as Kinexys Digital Payments, Citi Token Solutions, and Customers Bank’s platform using Tassat’s technology—have often operated on closed, single-bank networks. However, JP Morgan and MIT DCI emphasized that most regular payments occur across multiple banks, highlighting a need for cross-bank compatibility.

To address this, the joint research maps out how current Ethereum token standards compare to the needs of bank token functions and finds significant gaps. One notable absence is robust support for payment orchestration. The authors illustrate that the popular ERC-20 Ethereum standard only handles basic details like sender, receiver, and amount. In contrast, the ISO 20022 global payment messaging standard contains about 750 pieces of information, reflecting the complex requirements banks face. The authors suggest a new format for payment information, where wallets gather necessary details and banks respond with authorization for on-chain validation.

“These standards should be designed to be narrow in scope and componentized in a way that allows them to be easily composed with other standards,” the paper states, highlighting the need for compatibility. The organizations noted that a recent Linux Foundation Decentralized Trust event revealed the sector’s urgent need to merge standards, not simply create separate ones for each institution.

Another area of concern is how to handle situations where accounts must be frozen or funds seized. While freezing is sometimes possible on blockchains—especially for stablecoins—seizing assets outright in a trustless environment remains difficult. In regulated banking, seizing is essential and the authors propose this task should be performed with clear transparency to maintain trust.

The research also addresses regulatory implications for blockchain banking. Currently, banks must validate both the sender and recipient during transactions. In distributed ledger payments, the authors propose that each institution only verify its own clients and payment endpoints.

Additional observations from Ledger Insights warn that the fast advance in programmability—such as conditional payments and more complex transaction logic—could quickly outpace today’s standards. The report cautions that systems unable to anticipate future functions may soon become inefficient, suggesting a need for adaptable system designs.

For further technical and regulatory details, readers can reference the complete paper or consult the supporting report from Ledger Insights.

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