When JPMorgan Chase launched its JPM Coin deposit token on Coinbase’s Base blockchain this week, it marked more than just another bank’s foray into digital assets. It signaled the opening salvo in what could become the most consequential competition in cryptocurrency: traditional banking versus crypto-native stablecoins.
For years, Tether’s USDT and Circle’s USDC have dominated the digital dollar landscape with minimal interference from traditional finance. Tether currently commands approximately 70% of the stablecoin market at $132 billion, while Circle’s USDC holds roughly 20% at $39 billion. But JPMorgan’s move suggests this duopoly may face its most formidable challenger yet—not from another crypto startup, but from the world’s largest bank.
The Deposit Token Advantage
What makes JPM Coin particularly threatening isn’t just the JPMorgan brand. The token represents dollar deposits at the bank and enables payments to process in seconds, 24/7, bypassing traditional banking delays. More critically, deposit tokens are direct claims on bank deposits and can be interest-bearing, making them an appealing option for institutional investors.
This yield-bearing capability creates an immediate competitive edge. While USDT and USDC holders receive no interest on their holdings, JPM Coin users can potentially earn returns while maintaining instant liquidity. For institutional treasurers managing billions, that difference compounds quickly.
The regulatory positioning is equally shrewd. Unlike stablecoins, which are typically backed one-to-one by reserves such as government bonds or other liquid assets, deposit tokens are direct claims on bank deposits. This distinction allows JPMorgan to sidestep emerging stablecoin regulations while offering similar functionality—a form of regulatory arbitrage that crypto-native issuers cannot replicate.
Network Effects and the Banking Moat
JPMorgan isn’t entering this market alone. The rollout follows successful pilot tests with major firms, including Mastercard, Coinbase, and B2C2, with Coinbase reportedly set to accept JPM Coin as collateral for transactions and liquidity operations. This immediate integration with crypto infrastructure gives the token credibility that would take years for a startup to build.
More ominously for Tether and Circle, JPMorgan has signaled plans for a multi-bank framework. Recent reports indicate the bank is exploring tokenized deposit interoperability with institutions like Singapore’s DBS Bank. If major global banks create an interconnected network of deposit tokens, they could effectively replicate the dollar-based payment system that made USDT and USDC valuable—but with the full backing and trust of regulated banking institutions.
The existing Kinexys Digital Payments network, JPMorgan’s internal blockchain system, already processes over $2 billion in daily transactions for corporate clients. That’s real-world usage at scale, not speculative trading volume.
The Stablecoin Vulnerability
Both Tether and Circle face structural challenges that bank-issued tokens don’t share. Tether’s USDT fell from 70% market dominance in November 2024 to 59.9% by October 2025, largely due to Europe’s Markets in Crypto-Assets regulation enforcement. Circle has been more proactive in seeking regulatory compliance, becoming the first MiCA-licensed stablecoin issuer, but compliance comes with costs and constraints.
Meanwhile, Tether’s lack of full audits continues to generate skepticism among institutional users. Circle’s transparency is better, but neither can offer the institutional familiarity and regulatory safety of a federally-regulated bank deposit.
The competitive threat extends beyond just market share. If enterprises begin viewing deposit tokens as the “institutional-grade” option and stablecoins as the “retail” alternative, it could create a permanent bifurcation in the market. Banks could capture the high-value institutional segment while stablecoins remain relegated to trading and DeFi protocols.
Not a Guaranteed Victory
However, declaring stablecoins dead would be premature. USDT and USDC have massive first-mover advantages. They’re integrated into thousands of trading pairs, DeFi protocols, and payment systems globally. Tether is used in 66% of all stablecoin-based trades on centralized exchanges, and dislodging that liquidity advantage won’t happen overnight.
Stablecoins also offer something banks can’t: permissionless access. Anyone with an internet connection can hold USDC without opening a bank account or passing KYC checks. JPMD is a permissioned token, meaning it is only available to JPMorgan’s institutional clients. This fundamental difference means stablecoins will likely retain dominance in emerging markets, decentralized finance, and anywhere banking infrastructure is weak or restricted.
Geographic reach matters too. While JPMorgan operates globally, it doesn’t have banking relationships in every jurisdiction. Stablecoins, by contrast, work anywhere there’s blockchain access. That makes them particularly valuable in regions with capital controls, unstable local currencies, or limited banking access—use cases that represent billions of potential users.
The Coming Consolidation
What seems most likely isn’t that JPM Coin destroys USDT and USDC, but rather that it accelerates market segmentation. Institutional treasury operations and large B2B transactions may increasingly flow through bank-issued deposit tokens, attracted by regulatory compliance, yield generation, and institutional-grade infrastructure.
Meanwhile, stablecoins will continue dominating peer-to-peer transfers, DeFi applications, cross-border remittances, and markets where permissionless access trumps regulatory blessing. The $190 billion stablecoin market may not shrink, but its growth trajectory could be capped as banks siphon off the institutional segment.
Other major banks are clearly watching. Citigroup, Deutsche Bank, Bank of New York Mellon, and others have announced similar initiatives. If multiple major banks launch interoperable deposit tokens, the combined competitive pressure could be existential for stablecoin issuers’ growth ambitions.
The real question isn’t whether JPM Coin will immediately overtake Tether and Circle—it won’t. But in five years, as bank deposit tokens proliferate and become interoperable while offering yield and regulatory clarity, the stablecoin landscape could look radically different. The crypto revolutionaries who built the stablecoin market may find themselves outcompeted by the very institutions they sought to disrupt.
In that scenario, Tether and Circle face a stark choice: evolve into regulated, bank-like entities themselves, or accept permanent relegation to the segments traditional finance won’t serve. Either way, JPMorgan’s entrance changes everything.
