JPMorgan Chase continues to advance into the blockchain ecosystem, as the financial institution has chosen the Base network to pilot its newly launched deposit token, JPMD.
The pilot program was confirmed by Naveen Mallela, the executive of JPMorgan's blockchain division, Kinexys. In an interview with Bloomberg, he stated that a fixed amount of JPMD tokens will be transferred to the cryptocurrency exchange Coinbase in the coming days.
This transfer will be executed through Coinbase's Layer 2 blockchain network, Base. Launched in 2023, the Base network currently holds the largest market share among Ethereum Layer 2 networks, according to CoinGecko.
Naveen mentioned that the transaction will be denominated in US dollars and will also support other currencies after obtaining regulatory approval.
According to Naveen, after the pilot phase, which is expected to last several months, Coinbase's institutional clients will be able to trade using JPMD.
The official announcement of the pilot test came just days after JPMorgan filed a trademark application for JPMD. The trademark application covers a range of crypto-related services, including digital asset trading, transfers, and payment processing.
Specifically, deposit tokens represent US dollar deposits held in customer bank accounts. Unlike stablecoins (which are digital representations of fiat currency backed by cash and cash equivalents), deposit tokens operate within the traditional banking framework.
Naveen stated in the Bloomberg interview, "From an institutional perspective, deposit tokens are a superior alternative to stablecoins." He pointed out that the partial reserve backing of deposit tokens makes them more scalable.
The executive also mentioned that JPMD may pay interest in the future, distinguishing it from most stablecoins that do not generate yield.
However, yield-bearing stablecoins may gradually gain traction over time. Some industry insiders have indicated that the powerful banking lobby in the U.S. is "panicking" over the potential of these stablecoins to disrupt traditional financial models.
According to sources close to the banking lobby, NYU professor Austin Campbell stated that bank executives are concerned they may be "harmed" by the rise of yield-bearing stablecoins.
Related: JPMorgan files for "JPMD" trademark for crypto payment services
Original: “JPMorgan advances JPMD pilot on Base network, claims deposit tokens are superior to stablecoins”
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