Financial Giants Test the Waters of Blockchain: New Deposit Token JPMD Debuts

Recently, a global financial institution announced that it will pilot the launch of a deposit token called JPMD, a new type of digital asset that will be deployed on the Base blockchain. It is expected that in the next few days, the institution will transfer a certain amount of JPMD from its digital wallet to a large cryptocurrency exchange.

In the initial stage, JPMD is only open for use by institutional clients of the financial institution. In the future, after obtaining approval from US regulatory authorities, its usage is expected to gradually expand to a broader user base and may support more coins.

JPMD Pilot Program Details

The deposit token program was not established 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 project, it was revealed that the institution had applied for the "JPMD" trademark, covering features such as cryptocurrency trading, payments, and custody.

The global co-head of the blockchain division of the institution stated in a media interview that JPMD will be priced in US dollars, and its issuance and transfer will take place on the Base Blockchain. In the future, institutional clients of the cooperating exchanges will be able to trade using this deposit Token. He added that the plan is to run this pilot for several months and, after obtaining regulatory approval, gradually expand to other users and types of coins.

"From an institutional perspective, deposit tokens are a superior alternative to stablecoins. Because they are based on a fractional reserve banking system, we believe they are more scalable." The official pointed out that deposit tokens like JPMD may have interest-bearing features in the future and could be included in deposit insurance, characteristics that mainstream stablecoins typically do not possess.

The JPMD pilot marks the financial institution's expansion of the application of digital asset products beyond its internal systems. The institution has been at the forefront of promoting the application of Blockchain technology and is currently operating a digital payment network that supports corporate clients in transferring US dollars, euros, and British pounds.

According to reports, after the transaction volume on the network increased tenfold last year, it currently processes an average of over $2 billion in transactions daily. However, this still only accounts for a small portion of the total daily transaction amount of about $100 trillion processed by the institution's payment department.

Although JPMD is designed to operate on a public Blockchain, it will still be a permission-controlled Token, available only for institutional clients of the financial institution.

The Difference Between Deposit Tokens and Stablecoins

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

Deposit tokens can support a variety of application scenarios, with functions comparable to those of current commercial bank currencies, including domestic and overseas payments, transactions and settlements, and the provision of cash collateral. Their token form can also enable new features, such as programmability and instant, atomic settlement, thereby speeding up transaction times and automatically executing complex payment operations.

In contrast, stablecoins are tokens that are pegged to fiat currencies, typically backed on a 1:1 basis by a basket of securities (such as government bonds or other highly liquid assets). Although stablecoins have been an important financial innovation over the past few years, driving the development 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 regulation 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.

In Europe, some industry insiders believe that the EU may lag behind the US and Asia in the field of digital assets. An executive from an asset management company stated that the EU could become a "region that is being overtaken," while the US and Asia are accelerating their embrace of the development of digital assets.

Overall, the launch of JPMD is not only an important milestone in the blockchain strategy of the financial institution but also reflects that traditional financial institutions are accelerating their exploration of the future form of on-chain payments. Currently, several multinational financial and technology companies are also trying to leverage blockchain technology to achieve more efficient and cost-effective 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 phase. The development in this field is worth continuous attention.