“This pilot combines the credibility of both JPMorgan and Base to help bring institutional money into a more global economy,” Jesse Pollack, VP of engineering at Coinbase, said in a statement.
The token will be used to settle transfers around the clock and make cross-border business-to-business payments on Base, Naveen Mallela, global co-head of JPMorgan Chase’s blockchain division, Kinexys, told Fortune. “We have always believed in having a token-based solution on public blockchains,” he said.
JPMorgan’s decision to create a deposit token instead of a stablecoin is a noteworthy break in an otherwise new corporate trend, and allows the bank to stand out in a crowded field.
JPMorgan chose to launch a deposit token, rather than a stablecoin, because of its different use cases, Mallela said. Stablecoins, such as Tether’s USDT and Circle’s USDC, are primarily used by retail clients for crypto trading, remittances, and as a store of value, and are managed by crypto companies, he says. Deposit tokens, on the other hand, are more suitable for institutional clients because they are issued by a licensed bank, making them better integrated into existing institutional financial systems.
“Institutional clients can treat JPMD as bank deposits on their balance sheet, providing certainty around financial and accounting treatment,” Mallela said.
Each JPMD deposit token traded on Base will represent a deposit claim against JPMorgan. Rather than being backed 1:1 by the U.S. dollar like a stablecoin, JPMD will be backed by “the same liquidity frameworks as traditional banks,” Mallela said.
