JPMorgan Chase has started a pilot program for its deposit token, JPMD, using the Base blockchain network.
The pilot involves transferring a set amount of JPMD tokens to Coinbase, with transactions denominated in US dollars, according to Naveen Mallela of JPMorgan’s blockchain division, Kinexys.
Additional currencies may be supported after regulatory approval, Mallela explained.
The Base network, launched in 2023, has seen its total value locked more than double in the past year, according to DefiLlama.
Once the pilot phase concludes, which is expected to last several months, Coinbase’s institutional clients will be able to use JPMD for transactions, Mallela said.
JPMorgan recently filed a trademark application for JPMD, outlining services such as digital asset trading, transfers, and payment processing.
Deposit tokens like JPMD represent dollar deposits held in customer bank accounts and operate within the traditional banking framework, setting them apart from stablecoins, which are digital assets backed by cash or equivalents.
“From an institutional standpoint, deposit tokens are a superior alternative to stablecoins,” Mallela told Bloomberg, citing their scalability due to fractional reserve backing.
He also noted that JPMD could potentially pay interest in the future, a feature not typical of most stablecoins.
The rise of yield-bearing stablecoins has raised concerns within the banking sector.
According to New York University professor Austin Campbell, some banking executives worry about the impact of these stablecoins on traditional financial models, saying they fear they will be “harmed” by their growth.
Industry observers have suggested that the U.S. banking lobby is closely monitoring the evolution of yield-bearing stablecoins and their potential to disrupt established practices.