Original Article Title: The Battle for On-Chain Finance: Who Will Design the New Order?

Original Article Author: Tiger Research

Original Article Translation: AididiaoJP, Foresight News

Content Summary

· JPMorgan Chase has started issuing deposit tokens on the public chain, overlaying blockchain technology onto the existing financial order

· Circle has applied for a trust bank charter, attempting to build a brand-new financial order on a technological basis

· Two types of institutions are attacking traditional finance from different directions, forming a "convergent divergence" trend

· The blurring of value positioning may weaken their respective competitive advantages, requiring a clear delineation of core strengths and finding a balance

A New Competitive Landscape for On-Chain Financial Infrastructure

Blockchain technology is reshaping the fundamental architecture of the global financial infrastructure. According to the latest report from the Bank for International Settlements (BIS), as of the second quarter of 2025, the global scale of on-chain financial assets has exceeded $48 trillion, with an annual growth rate of over 65%. In this wave of transformation, traditional financial institutions and crypto-native companies have demonstrated markedly different development paths:

Represented by Traditional Financial Institutions: JPMorgan Chase

Adopting a progressive reform strategy of "Blockchain +," embedding distributed ledger technology into the existing financial system. Its blockchain division, Onyx, has served over 280 institutional clients, with an annual transaction volume of $600 billion. The recently launched JPM Coin has a daily settlement volume exceeding $12 billion.

Represented by Crypto-Native Companies: Circle

Constructed a fully blockchain-based financial network through the USDC stablecoin. Currently, the USDC circulation has reached $54 billion, supporting 16 mainstream public chains, with daily transaction counts exceeding 3 million.

Compared to the fintech revolution of the 2010s, the current competition exhibits three significant differences:

1. Shifting the competitive focus from user experience to infrastructure reconstruction

2. Sinking technological depth from the application layer to the protocol layer

3. Participants transitioning from complementary relationships to direct competition

JPMorgan Chase: Technological Innovation Within the Traditional Financial System

JPMorgan Chase has applied for a trademark for its deposit token 'JPMD'

In June 2025, JPMorgan Chase's blockchain department Kinexys began a pilot run of the deposit token JPMD on the public chain Base. Previously, JPMorgan Chase mainly utilized blockchain technology in private chain applications, but this time it directly issued assets and supported circulation on an open network, marking the start of traditional financial institutions operating financial services directly on a public chain.

JPMD combines the characteristics of digital assets with traditional deposit functions. When a customer deposits dollars, the bank records the deposit on its balance sheet and simultaneously issues an equivalent amount of JPMD on the public chain. This token can circulate freely while still retaining the legal claim to the bank deposit. Holders can redeem it 1:1 for dollars and may enjoy deposit insurance and interest earnings. Existing stablecoins' profits are concentrated on the issuers, while JPMD differentiates itself by granting users substantive financial rights.

These features provide significant practical value to asset management institutions and investors, even to the extent of overlooking some legal risks. For example, if on-chain assets like BlackRock's BUIDL Fund adopt JPMD as a redemption payment tool, they can achieve 24/7 instant redemptions. Compared to existing stablecoins that require separate fiat conversions, JPMD supports immediate cash conversions while offering deposit protection and interest-earning opportunities, holding significant potential in the on-chain asset management ecosystem.

JPMorgan Chase's introduction of the deposit token is a response to the new fund flows and revenue structures formed by stablecoins. Tether generates approximately $13 billion in annual revenue, while Circle creates substantial returns by managing secure assets like government bonds. Although these models differ from traditional interest spreads, their mechanisms of generating revenue from customer funds are similar to some banking functions.

JPMD also has limitations: its design strictly adheres to the existing financial regulatory framework, making it challenging to achieve the full decentralization and openness of blockchain. Currently, it is only available to institutional clients. However, JPMD represents a practical strategy for traditional financial institutions to enter public chain financial services while maintaining existing stability and compliance requirements. It is seen as a representative case of the extension of the traditional financial system to the on-chain ecosystem.

Circle: Blockchain-Native Financial Reconstruction

Circle has established a key position in on-chain finance through the stablecoin USDC. USDC is pegged 1:1 to the US dollar, with reserves in cash and short-term US treasuries. Leveraging technical advantages such as low fees and instant settlements, USDC has become a practical alternative for corporate payment settlements and cross-border remittances. USDC supports 24/7 real-time transfers, bypassing the complex processes of the SWIFT network and helping businesses overcome limitations of traditional financial infrastructure.

However, Circle's current business structure faces multiple constraints: BNY Mellon holds the USDC reserve, BlackRock manages asset operations, and this architecture delegates core functions to external institutions. While Circle receives interest income, its actual control over the assets is limited, and its current profit model is heavily dependent on a high-interest rate environment. Circle needs a more independent infrastructure and operational authority, which is a necessary condition to achieve long-term sustainability and revenue diversification.

Source: Circle

In June 2025, Circle applied to the Office of the Comptroller of the Currency (OCC) for a national trust bank charter, a strategic decision that goes beyond mere compliance needs. The industry interprets this as Circle's transformation from a stablecoin issuer to an institutional financial entity. The trust bank status will allow Circle to directly manage reserve custody and operations, enhancing its internal control capabilities over financial infrastructure and creating conditions to expand its business scope. Circle will lay the foundation for institutional digital asset custody services.

As a native crypto company, Circle is adjusting its strategy to establish a sustainable operational system within the institutional framework. This transformation requires accepting the rules and roles of the existing financial system, at the cost of reduced flexibility and increased regulatory burden. The specific permissions to be obtained in the future will depend on policy changes and regulatory interpretations, but this attempt has already become an important milestone to measure the establishment of on-chain financial structures within the existing institutional framework.

Who Will Lead On-Chain Finance?

From traditional financial institutions like JPMorgan Chase to crypto-native companies like Circle, participants from different backgrounds are actively positioning themselves in the on-chain financial ecosystem. This brings to mind the competitive landscape of the past fintech industry: tech companies entering finance through in-house implementation of core financial functions such as payments and remittances, while financial institutions expand their user base and improve operational efficiency through digital transformation.

The key is that this competition breaks down the boundaries between the two sides. A similar phenomenon is now emerging in the current on-chain financial field: Circle, by applying for a trust bank charter, is directly performing core functions such as reserve management, while JPMorgan Chase is issuing deposit tokens on a public chain and expanding its on-chain asset management business. Starting from different points, both sides are gradually absorbing each other's strategies and domains, seeking new balances individually.

This trend brings new opportunities but also entails risks. If traditional financial institutions forcibly imitate the flexibility of tech companies, they may clash with existing risk management systems. When Deutsche Bank pursued a 'digital-first' strategy, it incurred billions of dollars in losses due to clashes with legacy systems. On the other hand, if crypto-native companies overly expand institutional acceptance, they may lose the flexibility that supports their competitiveness.

The success or failure of on-chain finance competition ultimately depends on a clear understanding of its own roots and advantages. Companies must, based on their "unfair advantage," achieve an organic integration between technology and institutions. This balancing ability will determine who the ultimate winner is.

Original Article Link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia