On June 18, the U.S. Senate officially passed the "GENIUS Act," marking the first time the U.S. government has legally recognized the compliance legitimacy of crypto assets. This move effectively ends the regulatory ambiguity between the SEC and CFTC that had previously created a policy vacuum.

In light of this regulatory breakthrough, JPMorgan Chase and Coinbase announced significant developments on the same day, focusing on on-chain banking services and tokenized securities, respectively. This highlights the deepening integration between traditional finance and the crypto ecosystem.

You Can Now Deposit JPMorgan Funds on Base

JPMorgan Chase, one of the earliest and most proactive traditional financial institutions in blockchain development, unveiled its pilot program named JPMD (JPMorgan Deposit Token). JPMD is an on-chain token representing client dollar deposits, built on a fractional reserve mechanism, and will be deployed on Base, a public blockchain supported by Coinbase.

Naveen Mallela, Co-Head of JPMorgan's blockchain division Kinexys, stated that the bank would complete its first JPMD transaction in the coming days. This involves transferring funds from the bank's digital wallet to the Coinbase platform, paving the way for institutional clients to use the token for on-chain transactions in the future.

The pilot is expected to last several months and signifies JPMorgan’s continued efforts to explore efficient and secure institutional-grade trading tools through on-chain deposit tokens. One day prior, the bank applied for the “JPMD” trademark, covering areas such as digital asset payments, transfers, and trading services, underscoring its intent for long-term use of this tool.

JPMorgan’s decision to pilot the issuance of JPMD on Base reflects its confidence in Base's security and transactional efficiency. Furthermore, it suggests that institutional clients may eventually use Base and Coinbase’s ecosystem for direct on-chain fund settlements, injecting a core liquidity source into Coinbase's vision of creating a "CeDeFi bridge."

Why “Deposit Tokens”?

While the launch of JPMD has sparked speculation about JPMorgan entering the stablecoin market, Naveen Mallela, a senior executive at Kinexys, clarified in an interview with Bloomberg that deposit tokens are a superior alternative to stablecoins for institutional clients. Due to their fractional reserve mechanism, deposit tokens offer greater scalability.

He pointed out that deposit tokens represent actual dollar deposits from customers' bank accounts and operate based on the traditional banking system. In contrast, stablecoins are merely digital fiat representations backed by cash and cash equivalents, with their legal status and operational logic being more detached from the traditional financial system.

As the JPMD pilot program was launched, three core executives from JPMorgan held behind-closed-doors meetings with the SEC's Crypto Special Task Force. They discussed how capital market instruments could migrate to public blockchains, the potential impact such transformations might have on market structure, and how institutions should evaluate risk management and yield models in on-chain finance.

According to meeting notes released by the SEC, the discussions covered cutting-edge areas such as digital repo, digital debt instruments, and on-chain financing. JPMorgan also made it clear that it is actively assessing whether it can establish a structural competitive advantage in asset tokenization and on-chain settlement efficiency.

Beyond “chasing meme coins,” you can buy stocks on Base

Echoing JPMorgan’s exploration of on-chain banking systems, Coinbase is also evolving from a trading platform to an on-chain asset infrastructure provider. The company’s Chief Legal Officer, Paul Grewal, revealed that Coinbase is applying for a no-action letter from the U.S. SEC. If granted, this would allow Coinbase to offer tokenized stock trading services to U.S. customers with either an exemption or approval. A no-action letter means SEC staff would not take enforcement action against Coinbase for launching tokenized stock services.

If Coinbase successfully secures approval for its tokenized stock business, it will become the first platform to realize an integrated asset flow loop of “stablecoin purchase → on-chain settlement → stock trading → rewards spending” on a single platform. This not only challenges the transactional gateway positions of brokers like Robinhood and Charles Schwab but may also compel these platforms to consider adopting stablecoin payment and on-chain settlement logic, driving the entire securities industry into the era of on-chain assets.

Tokenized stocks promise faster settlement speeds, longer trading windows, and lower operational costs. However, U.S. investors currently cannot access such products. Coinbase’s new plan signifies its ambition not just to be the “Nasdaq of crypto assets” but also a key on-chain entry point for traditional securities trading.

In fact, Coinbase’s exploration of tokenized stocks is not new. As early as 2021, the company had planned to tokenize its own stock, COIN, during the S-1 filing stage before going public. However, the plan was shelved due to lack of SEC approval at that time.

This attempt represents Coinbase's latest move to expand its business beyond crypto-assets, aiming to create new revenue streams and promote further adoption at the institutional level. Just last week, Coinbase launched a credit card backed by American Express and collaborated with Shopify and Stripe to push the adoption of USDC stablecoin payments.

Regulatory uncertainty has long been a major obstacle hindering the widespread adoption of blockchain-based securities trading. However, with the SEC's adoption plans for DeFi and stablecoins, regulation clearly seems to no longer be an issue that Coinbase needs to worry about for the time being.

Meanwhile, competition is intensifying. News of Coinbase launching tokenized stocks comes hot on the heels of Kraken's announcement of the xStocks project just weeks ago. Kraken has already started offering on-chain trading services for over 50 stocks and ETFs across Europe, Latin America, Africa, and Asia. Coinbase will need a faster and clearer regulatory pathway to compete effectively in the new wave of crypto-brokerage competition.

All About the Revenue

Statistics show that retail trades account for only about 18% of activity on Coinbase. Since 2024 began, trading volume from institutional clients has continued to increase, with Q1 2024 seeing $256 billion in institutional trading volume, accounting for 82.05% of total volume. With the integration of DEX on Base, Coinbase should be able to bring significant liquidity to the tens of thousands of tokens on the Base chain. More importantly, numerous products in the Base ecosystem will gain access to Coinbase's compliance pathways with the real world.

Related Reading: "Coinbase Aims to Become the 'American Binance'"

This month, Coinbase has partnered with Shopify to support USDC payments on Base at e-commerce checkout pages, entering the realm of cross-border stablecoin payments. Additionally, it integrated Base's DEX into Coinbase's main application, bridging the liquidity between on-chain assets and CeFi users. Most disruptively, Coinbase announced the launch of 24/7 perpetual contracts trading within the United States under the CFTC's regulatory framework.

These moves all point to a common goal: rebuilding Coinbase’s revenue model. As spot trading income has declined year by year, Coinbase’s financial reports have revealed its heavy dependency on crypto market cycles for revenue. Against this backdrop, derivatives have become a more countercyclical revenue source. By integrating Deribit’s liquidity and user base, Coinbase is building a global derivatives trading ecosystem for institutional clients. The CFTC’s endorsement further establishes a regulatory moat for Coinbase in the U.S. market.

At the same time, Coinbase is leveraging its partnerships with Shopify and Stripe to drive the native use of USDC in e-commerce payment scenarios. Consumers can directly use USDC for payments when checking out in Shopify stores, while merchants have the option to settle in stablecoins or local currencies. Combined with smart contract custody and API modules on Base, this process eliminates the need for consumers or merchants to have in-depth crypto knowledge, forming a highly scalable "compliant crypto payment engine." Stablecoin transactions not only generate on-chain gas fees and settlement fees, but also open up stable revenue streams for Coinbase in long-tail markets like small businesses and cross-border e-commerce.

Meanwhile, Coinbase's collaboration with American Express on the Coinbase One Card uses cashback incentives to attract users by requiring asset staking, further activating transaction behavior within the platform. Although such products currently face the challenge of balancing costs and yields, they reflect Coinbase's strategic vision of gradually integrating "financial services + consumer scenarios" into a cohesive offering.

This multi-pronged approach is not accidental. During a critical window where favorable regulatory signals emerge and on-chain settlement infrastructure becomes increasingly robust, Coinbase has strategically positioned its platform as a hub—spanning from DEX, stablecoin payments to derivatives trading—to construct a multi-dimensional revenue network centered on compliance and characterized by diverse asset flows. Underlying this logic is Coinbase's pivotal transformation from a crypto exchange into an on-chain financial operating system.

Whether it's JPMorgan's JPMD issued based on bank deposits, or Coinbase’s foray into tokenized securities platforms, both point to the same trend—a systemic restructuring phase in on-chain finance, driven collectively by regulations, infrastructure, and mainstream financial institutions.

The passage of the GENIUS Act, the growing discussions around stablecoins, and various institutions' continued experimentation with on-chain market infrastructure signify that crypto finance is no longer a fringe experiment but is becoming an increasingly realistic choice for integration into the global financial market structure. The boundary between on-chain and off-chain systems is being progressively dismantled by these forerunners.

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