Fighting for dominance in on-chain finance: Who will define the new order?

Author: Shania, Jay Jo; Source: Tiger Research; Compiler: Vernacular Blockchain

JP Morgan issued deposit tokens on the public blockchain and integrated technology into the existing order. In contrast, Circle created a new order based entirely on technology by establishing a trust bank.

Interestingly, these two players with very different backgrounds and approaches are now embracing new technologies and building new institutions. This strategy ultimately blurs the boundaries between them.

However, this identity blurring may also weaken their inherent competitive advantages, as the fintech industry has experienced before. Therefore, each participant needs to understand the "unfair advantage" it has and find a balance between technology and institutions.

1. The battle for on-chain financial infrastructure

Blockchain technology is becoming the new cornerstone of global financial infrastructure. Traditional financial institutions and native crypto companies are competing fiercely for leadership in the next-generation financial system. JPMorgan Chase improves efficiency by integrating blockchain technology into the traditional financial system, while Circle is committed to building a new financial infrastructure based entirely on blockchain as an alternative to the traditional structure.

This model is similar to the competition between financial technology (fintech) and technology finance (techfin) driven by large technology companies in the past. However, the current competition landscape is completely different. In the past, the competition focused on improving user experience and providing limited financial services, while the current competition has penetrated into the core infrastructure level, covering asset issuance, capital flow, transaction settlement (settlement) and asset custody (custody).

This competition is not only about technological advantages, but also about who will design and operate the future financial ecosystem. Traditional financial institutions are trying to make incremental transformations within the existing regulatory and system frameworks, while native crypto companies are focusing on technological efficiency and scalability to build a new order. This report will explore the on-chain financial strategies of JPMorgan Chase and Circle, analyze the development direction of on-chain financial infrastructure, and how various participants will shape the new global financial order.

2. JPMorgan Chase: Building blockchain on traditional finance

In June 2025, JPMorgan Chase's blockchain division Kinexys began trialing deposit tokens (JPMD) on the public blockchain Base. Previously, JPMorgan Chase only applied blockchain technology on a small scale on private blockchain infrastructure. This time, JPMorgan Chase adopted a different strategy, issuing assets directly on the open network and supporting on-chain transactions. This marks an important turning point for traditional financial institutions to begin directly operating financial services on public blockchains.

JPMD combines the characteristics of digital assets and traditional deposits. When a customer deposits US dollars to JPMorgan Chase, the bank records it as a deposit in its balance sheet and then issues an equal amount of JPMD tokens on the public blockchain. These tokens can circulate freely on the blockchain while retaining the legal claim to the bank's deposits. Token holders can exchange them for US dollar cash at a 1:1 ratio and may enjoy deposit protection and interest income. Unlike traditional stablecoins that concentrate returns on the issuer, JPMD provides users with more substantial financial rights.

These characteristics provide asset managers and investors with practical conveniences beyond conventional legal stability. For example, assets operating on public blockchains can be redeemed 24 hours a day using JPMD as a payment instrument. JPMD supports instant redemption to cash, rather than requiring a separate “withdrawal” path to convert stablecoins to fiat. In addition, JPMD provides deposit protection and interest income potential, thereby enhancing the on-chain asset management ecosystem.

JPMorgan Chase launched deposit tokens in response to capital flows and new revenue structures 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 US government bonds. The revenue model of these stablecoins is different from the traditional loan-deposit spread, but generates a similar income structure through customer funds.

Of course, JPMD also has limitations. Its design is fully in line with the existing financial regulatory framework, making it difficult to achieve the full decentralization and openness of the blockchain. Currently, the service is only available to institutional clients. Nevertheless, JPMD provides a practical strategy for traditional financial institutions to enter public blockchain-based financial services while maintaining stability and compliance. Many industry observers believe that JPMD represents the continued evolution of the structural connection between traditional finance and the on-chain ecosystem.

3. Circle: Building Native Finance on the Blockchain

Circle has become a key player in the on-chain financial sector through its stablecoin USDC. USDC is pegged 1:1 to the US dollar, and its reserves consist of cash and short-term US Treasury bonds. USDC's technical advantages include low cost and instant settlement, and many companies use it as a practical alternative for corporate payments and cross-border remittances. USDC supports 24-hour real-time fund transfers without the complex procedures of the traditional SWIFT network, helping companies overcome the limitations of traditional financial infrastructure.

However, Circle's current business structure has some limitations. BNY Mellon serves as the reserve custodian of USDC, and BlackRock is responsible for asset operation management. This structure outsources core functions to external institutions. Although Circle can obtain interest income, it has limited direct control over assets. In addition, its current revenue model is highly dependent on a high interest rate environment. To achieve long-term sustainability and revenue diversification, Circle needs a more independent financial infrastructure and stronger operational authority.

To address these limitations, Circle applied to the U.S. Office of the Comptroller of the Currency (OCC) in June 2025 to establish a national trust bank. This move is not only a compliance effort, but also a transformation strategy. Many industry observers believe that this marks Circle's transformation from a simple stablecoin issuer to a comprehensive financial institution. The trust bank identity will enable Circle to directly manage reserve custody and asset operations, thereby strengthening internal control over its own financial infrastructure and expanding digital asset custody services for institutional investors.

Circle originated as a native crypto company, but is now adjusting its strategy to build sustainable operations within the existing institutional framework. This involves trade-offs, such as reduced flexibility and increased regulatory burden. The scope of authority acquired in the future will depend on policy developments and regulators' interpretation. Nevertheless, this move marks a key milestone in how on-chain financial structures can grow and adapt within the existing institutional framework.

4. Who will lead on-chain finance?

Participants from different backgrounds are actively entering the on-chain financial ecosystem, from traditional financial institutions such as JPMorgan Chase to native crypto companies such as Circle. This phenomenon is reminiscent of the competitive landscape of the fintech industry in the past. At that time, technology companies entered the financial field by internalizing core functions such as payment and remittance, while traditional financial institutions expanded user touchpoints and improved operational efficiency through digital transformation.

The key is that this competition is not simply parallel, but breaks the boundaries between the two. A similar phenomenon is now reappearing in the field of on-chain finance. For example, Circle directly handles core functions such as reserve management and asset custody by applying to establish a trust bank. JPMorgan Chase issued deposit tokens on public blockchains and expanded into the field of on-chain asset management. The two started from different directions, but gradually absorbed each other's strategies and business areas, trying to find a new balance.

This trend brings new opportunities, but also comes with risks. If traditional financial institutions are eager to imitate the agility and speed of technology companies, they may conflict with existing risk control systems. For example, Deutsche Bank promoted a "digital first" strategy and made large-scale IT investments, but caused system errors due to conflicts with old infrastructure, resulting in billions of dollars in losses.

In contrast, native crypto companies face different risks. They may sacrifice flexibility and execution capabilities - which have always been their main competitive advantages - by pursuing institutional acceptance too much.

The success of on-chain financial competition ultimately depends on a deep understanding of its own foundations and unique advantages. Enterprises must develop strategies based on their "asymmetric advantages" and coordinate the integration of technology and institutional frameworks on this basis. Whether these two elements can be balanced will determine who will be the ultimate winner.

2024