Written by: Weilin, PANews
On June 18, JPMorgan announced that it would pilot a deposit token called JPMD, deployed on the Coinbase-supported Base blockchain. It is expected that in the coming days, JPMorgan will transfer a certain amount of JPMD from its digital wallet to the largest U.S. cryptocurrency exchange, Coinbase.
Initially, the token will only be available for JPMorgan's institutional clients, and will gradually expand to a wider user base and more currencies after obtaining U.S. regulatory approval.
JPMD will pilot for several months and may have interest-bearing features in the future.
The launch of JPMD is not a rushed decision. As early as 2023, JPMorgan began researching the feasibility of deposit tokens within its blockchain division, Kinexys. Just a day before the announcement of the JPMD pilot, it was discovered that the bank had applied for the 'JPMD' trademark, covering functions such as cryptocurrency trading, payments, and custody. At that time, there was speculation that this would signal JPMorgan's entry into the stablecoin market.
However, JPMorgan has chosen not to issue a stablecoin, but rather emphasizes 'deposit tokens' as a more robust, regulated alternative.
Naveen Mallela, Global Co-Head of Kinexys at JPMorgan's blockchain division, stated in a Bloomberg interview that the issuance and transfer of the token will take place on Coinbase-associated public blockchain Base and will be denominated in U.S. dollars. In the future, Coinbase's institutional clients will be able to use this deposit token for trading. He added that JPMorgan plans to run the pilot for several months and gradually expand to other users and currency types after obtaining regulatory approval.
Mallela stated: 'From an institutional perspective, deposit tokens are a better alternative to stablecoins. Because they are based on a fractional reserve banking system, we believe they are more scalable.' He pointed out that deposit tokens like JPMD could potentially have interest-bearing features in the future and may include deposit insurance, while mainstream stablecoins typically do not have these characteristics.
The JPMD pilot means that the bank is expanding the use of digital asset products beyond its internal systems. JPMorgan has been at the forefront of pushing blockchain technology applications on Wall Street and currently operates a network called Kinexys Digital Payments (formerly JPM Coin), allowing corporate clients to transfer U.S. dollars, euros, and pounds from their bank accounts.
According to Bloomberg, JPMorgan stated that after the transaction volume on the network grew tenfold last year, it currently processes over $2 billion in transactions on average each day. However, this still only accounts for a small portion of the approximately $100 trillion in transactions processed daily by the bank's payments department.
Mallela indicated that JPMorgan will continue to operate and expand the Kinexys Digital Payments network, but initially, the user base for JPMD is expected to differ, with JPMD likely to be more popular among clients seeking stablecoin alternatives supported by commercial banks.
The JPMD pilot further supports the development of Base. 'Fund transfers should be measured in seconds, not days,' Base stated in an announcement on social media platform X on June 18, 'Commercial banks are going on-chain.'
Although JPMD is designed to operate on a public blockchain, Mallela stated that it will still be a permissioned token, available only for institutional clients of JPMorgan.
Is the stablecoin market 'too crowded'? How do JPMD deposit tokens differ from stablecoins?
Meanwhile, another JPMorgan executive expressed caution about the 'overcrowded' stablecoin market at the DigiAssets 2025 conference held on June 17.
I just think that as an industry, we all need to take a step back and consider whether we are ultimately making the market too crowded, or whether there will be more fragmentation as companies choose to use their own (stablecoins), said Emma Lovett, Executive Director at JPMorgan, at a conference in London. She oversees the company's work on market distributed ledger technology and credit.
She stated that the current market is 'in the peak period of stablecoin hype.' However, she believes that 'it will be very interesting to see how the market evolves in two or three years, for example, who issues their own stablecoins and who is using which one.'
In fact, in a white paper released a few years ago, JPMorgan introduced the meaning of deposit tokens and how they differ from stablecoins. The institution stated that the ongoing development of blockchain technology in commercial applications is generating a demand for blockchain-native 'cash equivalents', which can serve as liquid payment means and value storage tools in a blockchain-native environment. So far, stablecoins have primarily met this demand.
At the same time, deposit tokens and central bank digital currencies (CBDCs) have become the focus of discussions about the optimal form of digital currency in the future. Deposit tokens refer to transferable tokens issued on the blockchain by licensed deposit-taking institutions, representing the holder's claim for deposits to the issuing institution. Given that deposit tokens are presented as a new technology form of commercial bank money, they naturally belong to the banking system and are subject to the regulations and supervision currently applicable to commercial banks.
Deposit tokens can support a variety of application scenarios, comparable to the current functions of commercial bank money, including domestic and international payments, transactions and settlements, and the provision of cash collateral. Their token form can also enable new functionalities, such as programmability and instantaneous, atomic settlements, thereby accelerating transaction speeds and automatically executing complex payment operations.
This white paper states that stablecoins have been an important financial innovation in recent years, and their development has driven the growth of the digital asset ecosystem. However, as on-chain trading activities continue to scale and increase in complexity, stablecoins may pose challenges to financial stability, monetary policy, and credit intermediation when used at scale.
JPMorgan believes that deposit tokens will become a widely used form of currency in the digital asset ecosystem, just as commercial bank money in the form of bank deposits occupies more than 90% of circulating currency today. Their token form will benefit from the connections to traditional banking infrastructure and existing regulatory protections, which have supported the robust operation of commercial bank deposits.
In short, deposit tokens are transferable digital currencies representing a claim for deposits with commercial banks. Essentially, they are the digital version of customers' deposits in their accounts. They differ from stablecoins, which are tokens pegged to fiat currencies and typically backed at a 1:1 ratio by a basket of securities (such as government bonds or other highly liquid assets).
The Genius Act has passed the Senate, which will promote the adoption of stablecoins.
This round of stablecoin enthusiasm has largely been driven by the United States (Genius Act). This is a bipartisan-supported bill aimed at establishing a regulatory framework for stablecoins and digital assets. At the same time, it has also been incentivized by the public listing of Circle, the issuer of USDC.
On June 18, the U.S. Senate passed the stablecoin regulatory bill Genius Act with 68 votes in favor and 30 against, and the bill will be sent to the House of Representatives for consideration. The bill establishes a federal regulatory framework for stablecoins, requiring one-to-one reserves, consumer protection, and anti-money laundering mechanisms.
At the DigiAssets 2025 conference in London, an executive from Franklin Templeton said that the EU could potentially become a 'region being overtaken', while the U.S. and Asia are accelerating their embrace of the development of digital assets.
Overall, the launch of JPMorgan's JPMD not only marks an important milestone in the bank's blockchain strategy but also reflects that traditional financial institutions are accelerating their exploration of the future forms of on-chain payments.
Currently, multinational financial and technology companies, including Banco Santander, Deutsche Bank, and PayPal, are also trying to leverage blockchain technology to achieve more efficient and cost-effective payment settlement services.
In the process of blockchain technology becoming mainstream in the financial system, deposit tokens issued by commercial banks, protected by a regulatory framework, and connected to existing account systems may become the new standard for 'on-chain cash'.
