JPMorgan Launches Institutional Digital Currency JPMD on Ethereum Layer 2

JPMorgan Chase has introduced a new digital currency called JPMorgan Deposit Token (JPMD), designed to operate on the blockchain and exclusively available to trusted institutions such as large corporations, asset managers, and pension funds. This token aims to provide the legal protections, interest payments, and bank integration that traditional stablecoins do not fully offer, enabling institutions to move money quickly, safely, and around the clock.

JPMD integrates traditional banking features with the speed and accessibility of blockchain technology on a public blockchain (Base, built on Ethereum). This combination is intended to attract large institutions that have concerns about the regulation, stability, and trust associated with stablecoins like USDC or USDT.

Deposit tokens, such as JPMD, fit within the existing financial and legal framework of commercial banks, offering benefits like deposit insurance, interest payments, and accounting clarity for managing large volumes of funds. In contrast, stablecoins do not enjoy the same level of trust or integration with banks due to ongoing debates in the US Congress regarding their use and backing. Stablecoins have grown into a $260 billion market by being open and available for trading, remittances, lending, DeFi protocols, and as a fast way to store and move value across borders. Deposit tokens, on the other hand, facilitate large transactions, enable tokenized securities, handle business-to-business payments, and manage digital cash tied to real-world bank accounts, catering to the complex needs of institutions.

JPMorgan believes that JPMD is better suited for institutional use because it combines the convenience of blockchain with the confidence and structure of commercial banking. Hosted on the Base blockchain, a public Layer 2 network built by Coinbase on top of Ethereum, JPMD is protected from misuse or unwanted exposure and allows only verified institutional clients to interact with the system. This setup provides faster settlements and lower fees while controlling who uses the token through permissioned access. The Base blockchain also bridges JPMD to future blockchain use cases with its connection to Ethereum’s broader ecosystem.

Businesses can use JPMD in treasury operations, accounting systems, and financial reports without the extra friction that comes with third-party stablecoins. This is because the token allows them to treat it like cash they already hold in their JPMorgan accounts. Accountants, CFOs, and risk officers can easily trust, track, and report JPMD tokens because they are tied directly into the bank’s own infrastructure, differing from stablecoins that sit outside the banking system and may raise questions about compliance or reserve backing.

JPMD is also expected to pay interest while still providing instant settlement and on-chain liquidity, making it more appealing as a long-term financial tool for institutions with large cash balances. The token may also become insured like bank deposits to reduce risk and offer a level of protection that stablecoins currently can’t match in high-value transactions. Additionally, JPMD makes it easier for institutions to incorporate blockchain-based transactions without overhauling their internal workflows or facing delays due to incompatible systems. It integrates seamlessly with enterprise treasury platforms, payment processing tools, and settlement engines, supporting financial reporting systems to manage cash flow, settle trades, facilitate cross-border payments, and ensure regulatory compliance.

However, deposit tokens have less potential as a universal digital cash solution because JPMD is only available to pre-approved institutional clients connected to the bank. While anyone with a crypto wallet can access and use stablecoins, the permissioned nature of deposit tokens prevents smaller businesses, startups, or individuals from accessing the token, despite it running on a public blockchain. Banks using or issuing these tokens may face strict capital requirements and other compliance burdens due to current Basel guidelines classifying digital tokens operating on public, permissionless blockchains as high-risk assets. These institutions may be constrained by rules that make large-scale deployment expensive, risky, or not worth the effort, unless the Basel Committee updates its guidance or makes exceptions for well-structured deposit tokens.

JPMD may end up being siloed within a limited ecosystem because many institutions and platforms may prefer Ethereum mainnet, Polygon, Avalanche, or private blockchains for their digital asset strategies over its Layer 2 network built on Ethereum (Base). In contrast, stablecoins like USDC and USDT are highly attractive to developers, fintech companies, crypto exchanges, and users in emerging markets who want to move value across platforms without worrying about permissioned access or network compatibility. These stablecoins operate on multiple blockchains, including Ethereum, Solana, and Tron, and have a wide global reach, widespread wallet support, and integration with decentralized applications.

Smaller firms, fintechs, and international businesses may not have the technical infrastructure, legal clarity, or compliance capabilities that large institutions require to work with a permissioned token tied to a US bank. Firms operating in multiple regions or jurisdictions may not want to maintain a relationship with a specific bank to undergo a complex onboarding process. It may be difficult for deposit tokens to reach the scale and utility that stablecoins have already achieved when their growth is limited to a small circle of elite users. JPMD and similar tokens remain too tightly linked to individual banking ecosystems.

The infrastructure around digital tokens and stablecoins will decide which models succeed and at what scale as banks, governments, and global companies continue to experiment with tokenized assets, digital payments, and programmable money. Both stablecoins and deposit tokens could grow together, serving different types of users and use cases if public blockchains become widely accepted as safe, reliable environments for moving real-world value. It’s unlikely that either stablecoins or deposit tokens will completely replace the other, so the more realistic outcome is coexistence. Deposit tokens will likely dominate in highly regulated, high-value environments where trust, control, and integration with existing systems are essential. On the other hand, stablecoins will continue to lead in areas where openness, speed, and accessibility matter most, such as retail payments, global remittances, and decentralized applications.