Banking Legion Assembles: The Stablecoin Market Structure Faces Structural Shock
Author: Little Cake
On October 19, JPMorgan Chase announced that its dollar deposit token JPM Coin (ticker JPMD) has officially launched on the Ethereum mainnet, open to institutional clients.
This is not the first time JPMorgan Chase has put money on the blockchain. Last November, JPMD first launched on Coinbase's Base, and this year it plans to deploy on Digital Asset's Canton Network. But Ethereum is different. Ethereum hosts BlackRock's BUIDL fund, JPMorgan Chase's own tokenized money market fund, and a large number of institutional-grade tokenized assets. Putting JPMD on Ethereum means JPMorgan Chase is ready to engage directly in the "main battlefield" of crypto finance.
The significance of this event goes far beyond a single bank issuing a token; it may mark the entry of the strongest competitor in the stablecoin market: not another Tether, nor another Circle, but the banks themselves.
What is the difference between deposit tokens and stablecoins?
First, let's clarify a key concept.
JPMD is a "Deposit Token," not a stablecoin. While both appear to be pegged at 1 dollar to 1 dollar, their underlying logic is completely different.
Behind USDC or USDT are non-bank companies like Circle or Tether, which deposit customer funds in banks or purchase short-term government bonds, then issue tokens on the blockchain. They are a variant of "shadow banking," where the issuer is not a bank but performs banking functions.
JPMD, on the other hand, is backed by JPMorgan Chase's bank deposits themselves. Holding JPMD is equivalent to holding dollars in a JPMorgan Chase account, enjoying the same credit protection as regular bank deposits and bearing the same risks. It is "bank money" directly moved onto the blockchain.
This distinction leads to three practical consequences:
First, different regulatory treatment. Deposit tokens naturally operate within the banking regulatory framework and do not need to apply for additional licenses like USDC. As a globally systemically important bank, JPMD is born with a golden key.
Second, it can pay interest. The GENIUS Act explicitly prohibits payment stablecoins from paying interest to holders. However, deposit tokens are bank deposits and are not subject to this restriction. This means JPMD can theoretically generate returns like a fixed deposit, while USDC cannot.
Third, the entry threshold. USDC and USDT are permissionless, allowing anyone to hold and transfer them on-chain. JPMD is only open to institutional clients approved by JPMorgan Chase. This is a double-edged sword: it limits scale but also means compliance and credit ratings far exceed any stablecoin.
$4 trillion infrastructure
JPMD is not a zero-to-one experiment.
It is built on JPMorgan Chase's blockchain division Kinexys. Kinexys was formerly known as JPMorgan Onyx, which began building in 2019 and has processed over $4 trillion in transactions to date, with an average daily transaction volume of about $7 billion.
Of course, this figure covers all of Kinexys's business, including cross-border payments and tokenized collateral networks, not all of which is attributed to JPMD. JPMorgan Chase has also not disclosed specific transaction data for JPMD on the public chain. By comparison, JPMorgan Chase processes about $12 trillion in payments daily, with Kinexys currently accounting for only a small portion of that.
From another perspective: the total market capitalization of stablecoins on Ethereum is about $147.6 billion (as of October 19), with Tether at about $78.8 billion and Circle at about $45.9 billion. JPMorgan Chase manages assets exceeding $30 trillion.
Once the use cases for JPMD open up, even if only a small portion of deposits are tokenized, the impact on on-chain liquidity will be monumental.
Jamie Dimon's shift
Understanding this matter cannot avoid the evolution of JPMorgan Chase CEO Jamie Dimon's attitude.
In 2021, he said Bitcoin was "worthless." In 2023, he stated that if he were the government, he would "shut it down." By 2024, he referred to Bitcoin as a "pet rock."
But in May 2025, he relented: "Everyone has the right to buy Bitcoin." In the same year, JPMorgan Chase began allowing clients to purchase Bitcoin.
In his April letter to shareholders this year, Dimon wrote a line that has been repeatedly quoted on Wall Street: "A whole set of new competitors based on blockchain is emerging, including stablecoins. We need to launch our own blockchain technology."
This is not a whim. The threat Dimon sees is very specific: the U.S. Treasury estimates that if stablecoins can provide yields, up to $6.6 trillion in bank deposits could flow into stablecoins. The banking industry's lobbying groups are pressuring Congress to close this loophole. But rather than relying solely on lobbying, JPMorgan Chase chose to "enter the field themselves."
The logic of JPMD is clear: rather than letting Tether and Circle use quasi-deposit products to steal bank customers, banks should move deposits onto the blockchain themselves, using native bank credit and regulatory advantages to compete.
The banking coalition assembles
JPMorgan Chase is not alone in this endeavor.
According to The Wall Street Journal, an alliance of major banks including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo is building a shared tokenized deposit network through The Clearing House, aiming to launch in the first half of 2027. This network will allow participating banks to make on-chain payments directly using tokenized deposits.
Other banks are also advancing their initiatives:
Citigroup's Citi Token Services is already operating tokenized deposits in seven markets, expanding to Japan and the UAE by September 2026.
SoFi Bank launched sofiUSD in December 2025, the first stablecoin issued on a public blockchain by a national bank in the U.S. insured by the FDIC, based on Ethereum, and expanded to Solana in April.
HSBC has obtained a license from the Hong Kong Monetary Authority to launch a Hong Kong dollar stablecoin called RedCoin.
Société Générale's SG-FORGE has launched euro and dollar stablecoins compliant with MiCA regulations in Europe.
A picture is emerging: large global banks are collectively entering the on-chain payment and settlement space. It represents a regulated, bank-backed on-chain currency system.
The real turning point in the stablecoin market
Putting these pieces together reveals a structural transformation that is underway.
The stablecoin market is currently about $316 billion, with Tether and Circle accounting for a combined 83% market share. Citigroup predicts that by 2030, this market will reach between $1.9 trillion and $4 trillion.
Over the past five years, this market has essentially been a duopoly between Tether and Circle. The two companies have captured different segments of the market, one offshore and the other compliant.
However, the entry of banks has changed the rules of the game.
For Circle, the threat is most direct. The core selling point of USDC is "compliant dollar stablecoin," targeting institutional clients. When JPMorgan Chase enters the fray, offering higher credit ratings, better regulatory treatment, and potentially interest-bearing on-chain dollars, Circle's most valuable customer base faces the risk of being siphoned off. Circle just completed its IPO this year, and facing direct competition from banks at this timing adds significant pressure.
For Tether, the short-term impact is limited. USDT's foundation lies in cross-border payments in emerging markets and offshore dollar demand, which banks currently cannot reach. However, if the banking alliance's shared network goes live in 2027 and covers large institutional payments, Tether's incremental space will be further compressed.
The deeper question is: when "bank money" and "crypto money" both run on the same chain, who will win?
Deposit tokens have bank credit, regulatory protection, and potential interest, but they come with high barriers and lack freedom. Stablecoins are permissionless, globally accessible, and operate 24/7, but their credit ratings are lower than bank deposits and they face increasingly stringent regulations.
The two may not simply be in a substitutive relationship but rather in layered competition: in institutional settlement and large payments, deposit tokens gradually erode stablecoins' market share due to their credit advantages; in retail payments, DeFi, and emerging markets, stablecoins continue to maintain their first-mover advantage.
But the boundaries are becoming blurred. When JPMorgan Chase's JPMD and BlackRock's BUIDL are both running on Ethereum, and when tokenized deposits can directly settle tokenized funds, the wall between traditional finance and crypto finance may be thinner than anyone imagines.
JPMorgan Chase has moved deposits onto Ethereum. This step may be closer to changing the landscape of the stablecoin market than the issuance of any new stablecoin.