Global Financial Giants Test Deposit Tokens: Can JPMD Become an Alternative to Stablecoins?

Recently, a global leading financial institution announced the pilot launch of a deposit Token called JPMD, deployed on a certain public blockchain. It is expected that in the coming days, the institution will transfer a certain amount of JPMD from its digital wallet to a large cryptocurrency exchange.

Initially, JPMD is only available for institutional clients of the financial institution and will gradually expand to a broader user base and more coins after regulatory approval in the future.

JPMD Pilot Program Details

The launch of this deposit Token was not achieved overnight. As early as last year, the financial institution began researching the feasibility of deposit Tokens in its blockchain department. The day before the announcement of the JPMD pilot, it was discovered that the institution had applied for the "JPMD" trademark, covering functionalities such as cryptocurrency asset trading, payment, and custody.

The global co-head of the blockchain department at the financial institution stated in a media interview that JPMD will be priced in USD, with issuance and transfers occurring on a public blockchain. In the future, institutional clients of partner exchanges will be able to use this deposit Token for trading. He added that the plan is to run this pilot for several months and gradually expand to other users and currency types after obtaining regulatory approval.

"From an institutional perspective, deposit tokens are superior to stablecoins. Because they are based on a fractional reserve banking system, we believe they offer greater scalability." The executive pointed out that deposit tokens like JPMD could potentially have interest-bearing features in the future and may be eligible for deposit insurance, while most mainstream stablecoins currently do not have these characteristics.

The JPMD pilot marks that the financial institution is expanding the use of digital asset products beyond its internal systems. The institution has been at the forefront of promoting the application of blockchain technology and currently operates a network that supports corporate clients in transferring US dollars, euros, and British pounds. According to reports, the transaction volume of this network grew tenfold last year and currently processes over $2 billion in transactions on average per day.

The Difference Between Deposit Tokens and Stablecoins

In a white paper released a few years ago, the financial institution introduced the meaning of deposit Token and its difference from stablecoin. With the continuous development of blockchain technology in commercial applications, the market's demand for blockchain-native "cash equivalents" is increasing. These assets can serve as liquid means of payment and value storage tools in a blockchain-native environment.

Deposit tokens refer to transferable tokens issued by licensed deposit-taking institutions on the blockchain, representing the holder's claim to deposits with the issuing institution. As a form of commercial bank currency presented in new technology, deposit tokens naturally belong to the banking system and are subject to the regulations and supervision applicable to commercial banks.

Deposit Tokens can support various application scenarios, including domestic and international payments, trading and settlement, and the provision of cash collateral. Their Token form can also enable new functionalities, such as programmability and instant, atomic settlement, thereby accelerating transaction speeds and automating complex payment operations.

In contrast, stablecoins are tokens that are pegged to fiat currencies, typically backed by a basket of securities (such as government bonds or other highly liquid assets) on a 1:1 basis. Although stablecoins have facilitated the growth of the digital asset ecosystem, they may pose challenges to financial stability, monetary policy, and credit intermediation when used at scale.

Changes in the Regulatory Environment

Recently, the U.S. Senate passed the stablecoin regulatory bill GENIUS Act with 68 votes in favor and 30 against, which will be sent to the House of Representatives for consideration. This bill aims to establish a regulatory framework for stablecoins and digital assets, requiring one-to-one reserves, consumer protection, and anti-money laundering mechanisms.

At the same time, Europe's development in the digital asset sector seems to lag behind that of the United States and Asia. An executive from an asset management company stated at a recent conference that the EU could become a "region being overtaken," while the US and Asia are accelerating their embrace of the development of digital assets.

Future Outlook

The launch of JPMD is not only an important milestone in the blockchain strategy of the financial institution, but also reflects the traditional financial institutions' accelerated exploration of the future forms of on-chain payments. At present, many multinational financial and technology companies are also trying to utilize blockchain technology to achieve more efficient and lower-cost payment settlement services.

In the process of blockchain technology entering the mainstream financial system, deposit tokens issued by commercial banks, protected by a regulatory framework, and connected to the existing account system may become the new standard for "on-chain cash" in this new stage. The development in this field is worth continuous attention.