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

Author: Tiger Research

Compiled by: AididiaoJP, Foresight News

Abstract

• JPMorgan Chase begins issuing deposit tokens on public chains, overlaying blockchain technology onto the existing financial order.

• Circle applies for a trust bank license, attempting to build a new financial order based on technology.

• Two types of institutions are attacking traditional finance from different directions, forming a "dual convergence" trend.

• The ambiguity in value positioning may weaken their respective competitive advantages, necessitating a clear identification of core strengths and finding a balance.

New Competitive Landscape of On-chain Financial Infrastructure

Blockchain technology is reshaping the fundamental architecture of global financial infrastructure. According to the latest report from the Bank for International Settlements (BIS), by the second quarter of 2025, the scale of global on-chain financial assets will exceed $4.8 trillion, with an annual growth rate of over 65%. In this wave of transformation, traditional financial institutions and crypto-native enterprises are showing distinctly different development paths:

Traditional Financial Institution Representative: JPMorgan Chase

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

Crypto-native Enterprise Representative: Circle

Has built a fully blockchain-based financial network through the USDC stablecoin. Currently, the circulation of USDC has reached $54 billion, supporting 16 mainstream public chains, with an average daily transaction volume exceeding 3 million.

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

The focus of competition has shifted from user experience to infrastructure reconstruction.

The depth of technology has descended from the application layer to the protocol layer.

Participants have shifted from complementary relationships to direct competition.

JPMorgan Chase: Technological Innovation within the Traditional Financial Framework

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

In June 2025, JPMorgan Chase's blockchain division, Kinexys, began trial operations of the deposit token JPMD on the public chain Base. Previously, JPMorgan Chase primarily applied blockchain technology through private chains, but this direct issuance of assets on an open network marks the beginning of traditional financial institutions operating financial services directly on public chains.

JPMD combines the characteristics of digital assets with traditional deposit functions. When customers deposit dollars, the bank records the deposit on its balance sheet while issuing an equivalent amount of JPMD on the public chain. This token can circulate freely while retaining the legal right to claim bank deposits, allowing holders to exchange it 1:1 for dollars and potentially enjoy deposit insurance and interest income. Existing stablecoin profits are concentrated among issuers, while JPMD differentiates itself by granting users substantial financial rights.

These features provide very attractive practical value for asset management institutions and investors, even allowing for the neglect of some legal risks. For example, if on-chain assets like BlackRock's BUIDL fund use JPMD as a redemption payment tool, it could enable 24/7 redemptions. Compared to existing stablecoins that require separate conversion to fiat currency, JPMD supports instant cash conversion while providing deposit protection and interest income opportunities, showcasing significant potential in the on-chain asset management ecosystem.

The launch of the deposit token by JPMorgan Chase is a response to the new capital flows and income structures formed by stablecoins. Tether generates approximately $13 billion in annual revenue, while Circle also creates considerable income through managing safe assets like government bonds. Although these models differ from traditional loan-deposit interest spreads, their mechanisms for generating income based on customer funds are similar to certain banking functions.

However, JPMD also has limitations: its design strictly adheres to existing financial regulatory frameworks, making it difficult to achieve complete decentralization and openness in blockchain. Currently, it is only available to institutional clients. Nevertheless, JPMD represents a pragmatic strategy for traditional financial institutions to enter public chain financial services while maintaining existing stability and compliance requirements, and is seen as a representative case of the connection between traditional finance and the expansion of the on-chain ecosystem.

Circle: Financial Reconstruction Native to Blockchain

Circle has established a key position in on-chain finance through the stablecoin USDC. USDC is pegged 1:1 to the dollar, with reserves consisting of cash and short-term U.S. Treasury bonds. With advantages such as low fees and instant settlement, it has become a practical alternative for corporate payment settlements and cross-border remittances. USDC supports real-time transfers 24/7, eliminating the complex processes of the SWIFT network and helping businesses break through the limitations of traditional financial infrastructure.

However, Circle's existing business structure faces multiple constraints: BNY Mellon custodies the USDC reserves, and BlackRock manages asset operations, delegating core functions to external institutions. Although Circle earns interest income, its actual control over assets is limited, and its current profit model heavily relies on a high-interest-rate environment. Circle needs a more independent infrastructure and operational authority, which is a necessary condition for achieving long-term sustainability and income diversification.

Source: Circle

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

As a crypto-native enterprise, Circle is adjusting its strategy to establish a sustainable operating 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 obtained in the future will depend on policy changes and regulatory interpretations, but this attempt has already become an important milestone for measuring the establishment of on-chain financial structures within the existing institutional framework.

Who Will Dominate On-chain Finance?

From traditional financial institutions like JPMorgan Chase to crypto-native enterprises like Circle, participants from different backgrounds are actively laying out the on-chain financial ecosystem. This evokes memories of the past competitive landscape in the fintech industry: technology companies entered the financial sector by implementing core financial functions like payments and remittances internally, while financial institutions expanded their user base and improved operational efficiency through digital transformation.

The key is that this competition breaks down the boundaries between the two sides. A similar phenomenon is emerging in the current on-chain financial field: Circle directly performs core functions like reserve management by applying for a trust bank license, while JPMorgan Chase issues deposit tokens on public chains and expands its on-chain asset management business. Both sides, starting from different points, gradually absorb each other's strategies and fields, each seeking a new balance point.

This trend brings new opportunities but also contains risks. If traditional financial institutions forcibly imitate the flexibility of technology companies, it may conflict with existing risk control systems. For instance, Deutsche Bank faced billions in losses when implementing its "digital-first" strategy due to clashes with legacy systems. Conversely, if crypto-native enterprises excessively expand their institutional acceptance, they may lose the flexibility that supports their competitiveness.

The success or failure of competition in on-chain finance ultimately depends on a clear understanding of one's own foundations and advantages. Enterprises must achieve an organic integration between technology and institutions based on their "unfair advantages," and this balancing ability will determine who the ultimate winner is.