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

Author: Jay Jo Source: Tiger Research Translation: Shan Ouba, Golden Finance

Summary

• JPMorgan issues deposit tokens on the public chain, integrating new technologies into the existing financial order. Circle (the issuer of USDC) seeks to establish a trust bank to reconstruct a new financial order on the blockchain.
• It is worth noting that these two players, starting from different points, are both embracing new technologies and new institutional arrangements, which is blurring the lines between them.
• However, blurred identities may weaken their original competitive advantages, as has happened in the financial technology industry in the past. Therefore, each player needs to clearly recognize their "asymmetric advantages" and find a balance between technology and systems.

1. Competition in On-Chain Financial Infrastructure

Blockchain technology is becoming the new cornerstone of global financial infrastructure. Traditional financial institutions and crypto-native companies are competing for dominance in the next generation of financial systems. JPMorgan's strategy is to integrate blockchain technology into the existing financial system to enhance efficiency. Circle, on the other hand, is building a brand new financial infrastructure on blockchain to provide alternatives to the existing system.

This trend reminds people of the past competition between "traditional finance-centered FinTech" and "big tech company-centered TechFin." However, the current landscape is significantly different.

Competition is not just about simple technological advantages; it is more about who will design and operate the financial ecosystem of the future. Traditional financial institutions are attempting to gradually transform within the existing regulations and systems. In contrast, crypto-native enterprises are building a new order based on technological efficiency and scalability. This report explores the on-chain financial strategies of JPMorgan and Circle and analyzes the development direction of on-chain financial infrastructure.

2. JPMorgan: Building Blockchain on Traditional Financial Infrastructure

JPMorgan Chase has registered a trademark for a deposit token named "JPMD", source: JPMD document

In June 2025, JPMorgan's blockchain subsidiary Kinexys launched a pilot operation of the Deposit Token (JPMD) on the public chain Base. Previously, JPMorgan had only applied blockchain technology in a limited manner on private chain infrastructure. This time, it took a completely different approach:**

JPMorgan has directly issued assets on the open network and supports trading operations. This marks a significant turning point - traditional financial institutions are conducting financial services directly on public chains for the first time.

JPMD combines the characteristics of digital assets and traditional deposits. When customers deposit USD with JPMorgan Chase, the bank records this deposit on its balance sheet and issues an equivalent JPMD on the public blockchain. This token can circulate freely on the chain while retaining the legal claim to the bank deposit.

Token holders can exchange them for actual US dollars at a 1:1 ratio, and may enjoy rights such as deposit protection and interest income.

In contrast, current stablecoins often concentrate profits in the hands of the issuers, while JPMD differentiates itself by granting users substantive financial rights.

These features not only provide legal compliance stability but also bring practical convenience to asset managers and investors. For example, assets such as BlackRock's BUIDL fund or Franklin Templeton's on-chain money market fund, if using JPMD as a redemption medium, will achieve 24-hour liquidity.

Compared to existing stablecoins, JPMD does not require the exchange of fiat currency through traditional withdrawal channels, allowing for instant liquidity directly, while also providing deposit protection and interest earnings. This gives JPMD significant application potential in the on-chain asset management ecosystem.

JPMorgan Chase has launched a deposit token in direct response to the new type of capital flow and income structure formed around stablecoins. For example, Tether generates about $13 billion in revenue each year, and Circle also earns billions of dollars by managing safe assets such as government bonds.

Although these stablecoin models differ from the traditional "deposit-loan" interest rate model, they essentially reflect a certain "bank-like" function, which generates returns around customer funds.

Of course, this design also has its limitations. JPMD is built within the existing financial regulatory framework, making it difficult to truly achieve the "decentralization" and "openness" of blockchain. Currently, the service is limited to institutional clients.

Nevertheless, JPMD is still regarded as a realistically viable path to help traditional financial institutions enter the blockchain-based financial services sector while maintaining regulatory compliance and stability.

It has become a typical representative of the structural connection expansion between traditional finance and the on-chain ecosystem, receiving widespread attention from industry observers.

3. Circle: Building a Native Financial System on the Blockchain

Circle, through its stablecoin USDC, has become an important player in the on-chain finance space. USDC is pegged to the US dollar at a 1:1 ratio, with Circle using cash and short-term U.S. Treasury bonds as reserves. USDC boasts technical advantages such as low fees and instant settlement, making it a practical alternative for businesses for payments and cross-border remittances.

USDC supports 24-hour real-time fund transfers, eliminating the complex processes required by the existing SWIFT network. This capability helps businesses overcome the limitations of traditional financial infrastructure.

However, Circle's current business structure also faces multiple constraints. For example, the reserves of USDC are custodied by Bank of New York Mellon, and asset operations are managed by BlackRock. This structure delegates core functions to external institutions. Although Circle can earn interest income, its actual control over the assets is limited.

In addition, the current revenue model is also highly dependent on a high interest rate environment. In order to achieve long-term sustainable development and diversify revenue sources, Circle urgently needs more independent infrastructure and operational authority.

In June 2025, Circle applied to the Office of the Comptroller of the Currency (OCC) to establish a national trust bank, attempting to address the aforementioned restrictions. This is a strategic choice that goes beyond simple compliance. Industry observers interpret this as: Circle is transitioning from stablecoin issuance to institutional financial entities.

The identity of a trust bank will enable Circle to directly manage reserve custody and asset operations, which means that stablecoin issuers can strengthen their internal control capabilities within the existing financial system and expand their business boundaries. Circle also hopes to establish a foundation for providing digital asset custody services to institutional investors.

Circle started as a crypto-native company and is now adjusting its strategy to achieve sustainable operations within the regulatory framework. It actively embraces the rules and roles of the existing financial system, and this transformation comes with trade-offs such as decreased flexibility and increased regulatory burdens.

The future business permissions that can be obtained will depend on policy changes and regulatory interpretations. Nevertheless, this attempt remains an important milestone, marking the exploration of how on-chain financial architecture can take root within the existing institutional framework.

4. Who will lead on-chain finance?

From traditional financial institutions (such as JPMorgan Chase) to crypto-native companies (such as Circle), various players with different starting points are actively entering the on-chain financial ecosystem. This is quite similar to the competitive landscape of fintech in the past. Back then, technology companies entered the financial sector by internalizing core financial functions such as payments and remittances, while financial institutions expanded user touchpoints and improved operational efficiency through digital transformation.

Importantly, this competition is not a simple "parallel advancement", but rather breaks the boundaries between both parties. A similar phenomenon has re-emerged in the current on-chain financial sector:

Circle applies to establish a trust bank, aiming to directly execute core financial functions such as reserve management and custody; JPMorgan has issued deposit tokens on the public chain, expanding its business into the on-chain asset management sector. Although they start from different directions, they are gradually absorbing each other's strategies and areas, both searching for a new balance. This trend brings new possibilities but also carries risks: if traditional financial institutions overly impose the agility and speed of tech companies, it may conflict with existing risk management systems. For example, Deutsche Bank once implemented a "digital-first" strategy and made large-scale investments in IT, but due to conflicts with legacy infrastructure, it led to repeated system failures, ultimately resulting in losses of billions of dollars.

Conversely, native crypto companies also face another risk: when over-expanding institutional acceptance, they may lose the flexibility and execution capability that has always supported their competitiveness.

In the competition of on-chain finance, the ultimate victory will depend on whether one can truly understand and build on their own foundation and strengths.

Each participant needs to find a way to achieve the harmonious integration of technology and systems based on their own "asymmetric advantages". The ability to balance these two will determine who the future winners are.