On June 18, the U.S. Senate formally passed the GENIUS Act, marking the first time that the U.S. government has recognized the compliance legitimacy of crypto assets in the form of legislation, breaking the policy vacuum caused by the previous ambiguity in the regulatory powers of the SEC and CFTC.
Against this favorable regulatory backdrop, JPMorgan Chase and Coinbase announced major progress on the same day, respectively deploying their plans around on-chain banking and tokenized securities, demonstrating that traditional finance and the crypto ecosystem are deeply integrated.
JPMorgan Chase deposits can now be placed on Base
JPMorgan Chase, the earliest and most active traditional financial institution to deploy blockchain, announced the launch of a pilot project called JPMD (JPMorgan Deposit Token). JPMD is an on-chain token representing a customers US dollar bank deposit, based on a partial reserve mechanism, and will be deployed on the public chain Base supported by Coinbase.
Naveen Mallela, co-head of JPMorgans blockchain unit Kinexys, said the bank will complete the first JPMD transfer in the next few days, moving funds from its digital wallet to the Coinbase platform, paving the way for subsequent institutional clients to use the token for on-chain transactions.
The pilot is expected to last for several months, marking that JPMorgan Chase is further exploring efficient and secure institutional-level trading tools through on-chain deposit tokens. The day before, the bank had applied for the JPMD trademark, covering digital asset payments, transfers and trading services, showing its intention to deploy the tool for long-term application.
JPMorgan Chases choice to pilot the issuance of JPMD on Base not only demonstrates its recognition of Bases security and transaction efficiency, but also means that in the future institutional clients may directly conduct on-chain fund settlement through Base and the Coinbase ecosystem, which will inject a core source of liquidity into the CeDeFi Bridge created by Coinbase.
Why is it a “deposit token”?
Although the launch of JPMD has sparked market speculation that it may enter the stablecoin market, Naveen Mallela, an executive at Kinexys, the blockchain division of JPMorgan Chase, said in an interview with Bloomberg that deposit tokens are a better alternative to stablecoins for institutional users because they are based on a partial reserve mechanism and are more scalable.
He pointed out that deposit tokens represent actual US dollar deposits in customers bank accounts, and their operation relies on the traditional banking system. In contrast, stablecoins are only digital mappings of fiat currencies backed by cash and equivalents, and their legal status and operating logic are even more independent of the traditional financial system.
At the same time as the JPMD pilot was launched, three core executives of JPMorgan Chase held closed-door talks with the SEC Crypto Task Force to discuss how capital market instruments can be migrated to public chains, the impact that changes may have on market structure, and how institutions should evaluate the risk control and profit models brought about by on-chain finance.
According to the meeting minutes released by the SEC, the exchanges between the two sides covered a number of cutting-edge areas, including digital repurchases, digital debt instruments, and on-chain financing. JPMorgan also made it clear that it is actively evaluating whether it can form a structural competitive advantage in asset tokenization and on-chain settlement efficiency.
In addition to Chongtugou, you can also buy stocks on Base
In line with JPMorgan Chases exploration of the on-chain banking system, Coinbase is also evolving from an exchange platform to an on-chain asset infrastructure provider. Paul Grewal, the companys chief legal officer, revealed that Coinbase is applying for a no-objection letter from the U.S. SEC to launch tokenized stock trading services to U.S. customers, subject to exemptions or licenses. If a no-objection letter is obtained, it means that SEC staff will not take enforcement action against Coinbase for launching tokenized stock services.
If Coinbase is successfully approved for tokenized stock business, it will be the first time to realize the integrated asset circulation closed loop of stablecoin purchase → on-chain settlement → stock trading → rebate consumption on the same platform. This will not only challenge the trading entry status of brokerages such as Robinhood and Charles Schwab, but may also force these platforms to consider introducing stablecoin payment and on-chain settlement logic, forcing the entire securities industry to enter the era of on-chain assets.
Tokenized stocks promise faster settlement, longer trading windows, and lower operating costs. But currently, such products are not accessible to U.S. investors. Coinbase’s new plan means that it will not only be the “Nasdaq” of crypto assets, but will also become an on-chain entry for traditional securities trading.
In fact, this is not the first time that Coinbase has explored tokenized stocks. As early as the S 1 filing stage before the company went public in 2021, it had planned to tokenize its own stock COIN, but it was eventually shelved due to lack of SEC approval.
The attempt is the latest move by Coinbase to expand its business beyond crypto assets, aiming to open up new revenue streams and drive further institutional adoption. Just last week, Coinbase launched a credit card backed by American Express and partnered with Shopify and Stripe to promote the use of USDC stablecoin payments.
Regulatory uncertainty has been a major obstacle to the widespread adoption of blockchain securities trading. But with the SEC’s plans for DeFi and stablecoins, regulation is clearly an issue that Coinbase no longer needs to worry about.
At the same time, competition is intensifying. Coinbases launch of tokenized stocks comes on the heels of Krakens announcement of the xStocks project a few weeks ago. The latter has begun to provide on-chain trading services for more than 50 stocks and ETFs for the European, Latin American, African and Asian markets. Coinbase needs a faster and clearer regulatory channel to cope with the new round of competition for crypto brokerage.
All for revenue
According to statistics, retail investors transactions only account for about 18% of Coinbases transactions. Starting from 2024, the proportion of Coinbases institutional clients transactions began to increase continuously (the transaction volume in Q1 2024 was US$256 billion, accounting for 82.05% of the total transaction volume). As Coinbase integrates DEX on Base, it should be able to introduce a large amount of liquidity for tens of thousands of Base chain tokens. More importantly, a large number of products in the Base ecosystem will have the possibility of Coinbases compliance channel with the real world.
Related reading: Coinbase wants to be the Binance of America
This month, Coinbase has cooperated with Shopify to support USDC payments on Base on the e-commerce checkout page, entering the cross-border stablecoin payment market; on the other hand, it has integrated the DEX on Base into the Coinbase main application to open up the flow channel between on-chain assets and CeFi users; the most disruptive move is the announcement of the launch of a 24/7 perpetual contract trading function in the United States that complies with the CFTC regulatory framework.
All these actions point to one core - rebuilding Coinbases revenue model. As spot trading revenue shrinks year by year, Coinbases financial report data shows that its trading revenue is too dependent on the crypto market cycle. In this context, derivatives have become a more anti-cyclical source of revenue. By integrating Deribits liquidity and user base, Coinbase is building a closed loop of derivatives trading for global institutions, and the CFTC endorsement also enables it to form a compliance moat in the US market.
At the same time, Coinbase, through cooperation with Shopify and Stripe, promotes the native use of USDC in e-commerce payment scenarios. Consumers can pay directly with USDC when checking out at Shopify stores, while merchants can choose to settle in stablecoins or local currencies. Combined with the smart contract hosting and API modules on Base, this process does not require consumers or merchants to have encryption knowledge, forming a highly scalable compliant encryption payment engine. Stablecoin transactions not only bring on-chain gas fees and clearing fees, but also open up a stable income channel for Coinbase in long-tail markets such as small businesses and cross-border e-commerce.
The cooperation between Coinbase One Card and American Express uses rebates as a hook, and binds users through asset lock-up to further activate transactions on the platform. Although such products still need to face the trade-off between cost and yield, what is reflected behind it is Coinbases strategic vision of gradually integrating financial services + consumer scenarios into one.
This rhythm of attacking at multiple points is not accidental. In the window period when favorable regulations are emerging and on-chain settlement infrastructure is gradually being completed, Coinbase chooses to use its own platform as the hub to build a multi-dimensional income network with compliance as the core and diversified asset flows as the representation, from DEX, stablecoin payments to derivatives trading. Behind this logic is the key turning point of Coinbases transformation from a crypto exchange to an on-chain financial operating system.
Whether it is JPMD issued by JPMorgan Chase based on bank deposits or the layout of Coinbases tokenized securities platform, they all point to the same trend - on-chain finance is entering a period of institutional reconstruction driven by supervision, infrastructure and mainstream financial institutions.
The passage of the GENIUS Act, the heated up of stablecoin discussions, and the continued experimentation of major institutions on on-chain market infrastructure mean that crypto finance is no longer a fringe experiment, but a realistic option that is gradually embedded in the global financial market structure. The boundaries between on-chain and off-chain are being broken layer by layer by these pioneers.
